Tesla Bought 1.5 B in Bitcoins

[kpierce77]

If there was any doubt regarding the intentions of Tesla and Elon Musk, then the latter's tweet seems to have removed it. First of all, Tesla has sold only a small portion of the coins it hold (10% to be precise) and Elon's explanation is that they sold the coins to test the liquidity of Bitcoin. In the end, it turned out well for all the sides involved. The reaction from the cryptocurrency market has been overwhelmingly positive, with BTC rising by 8% against the US Dollar.

Yes in the first few hours many people were shocked, because they thought that Elon and Tesla would liquidate their bitcoin assets, but after they received information that it was only 10% and it was just to test the liquidation of bitcoin, it turned out to be good. This proves that Elon Musk and his team have the capability to control prices and the market quite well

[crwth]

Yes in the first few hours many people were shocked, because they thought that Elon and Tesla would liquidate their bitcoin assets, but after they received information that it was only 10% and it was just to test the liquidation of bitcoin, it turned out to be good. This proves that Elon Musk and his team have the capability to control prices and the market quite well

Having that large amount of BTC would surely be tremendous and need to be tested if it's possible and that liquidation made the Tesla team realize that it's great that they can do it and if necessary, they have that asset lying around and be a great performing asset by the company as well.

Probably some of their Tesla sales that were bought by BTC were liquidated within that 10% and it's going to work for them for sure.

[jaysabi]

It might be pretty good news. Tesla has just shown Bitcoin can be a viable cash reserve stash and can be used to make a quarterly earnings report look pretty good. There are lot of corporations with major money just laying around. If they start to put part of that into crypto, meaning Bitcoin, well that would be really something.

Do remember Bitcoin pricing still reflects it is a risky asset. The more big players get in, the less risky it becomes, the lower this negative risk premium.

I am not sure whether this is a good news for us. I was thinking that they are accumulating Bitcoins for the long term. But it looks as if they are indulging in speculative trading, at least with a part of the stash. They got the coins for a relatively cheap rate, so it makes sense for them to sell some of these coins. But I am curious about the tax implications. They have sold their coins just a few months after the purchase. Therefore short term capital gains tax will be applicable over the gains.

If you have to resort to gimmicks to improve your quarterly reports, then your business is troubled or outright trash. No good business needs to resort to gimmicks to juice the numbers, so if that's why it was done it's a huge red flag.  I don't think necessarily in Tesla's case that's what happened, but investors are going to see through these gimmicks if it starts to happen.  Trading bitcoin is not a business strategy for any company I'd invest in.

[Bitstar_coin]

If there was any doubt regarding the intentions of Tesla and Elon Musk, then the latter's tweet seems to have removed it. First of all, Tesla has sold only a small portion of the coins it hold (10% to be precise) and Elon's explanation is that they sold the coins to test the liquidity of Bitcoin. In the end, it turned out well for all the sides involved. The reaction from the cryptocurrency market has been overwhelmingly positive, with BTC rising by 8% against the US Dollar.

I don't suppose the 10% have been bought back yet after testing the btc liquidity, if not, it would have been mentioned in the tweet as well, perhaps they are waiting for a dip buy or it's no longer important to buy back the 10% sold!

Could that be the reason why Tesla was at second position on the bitcoin treasure list I saw earlier, MicroStrategy was top of the list with a huge %, my point is if the intention was not to sell for profit buy to test liquidity they should buyback to prove.

[jaysabi]

If there was any doubt regarding the intentions of Tesla and Elon Musk, then the latter's tweet seems to have removed it. First of all, Tesla has sold only a small portion of the coins it hold (10% to be precise) and Elon's explanation is that they sold the coins to test the liquidity of Bitcoin. In the end, it turned out well for all the sides involved. The reaction from the cryptocurrency market has been overwhelmingly positive, with BTC rising by 8% against the US Dollar.

I don't suppose the 10% have been bought back yet after testing the btc liquidity, if not, it would have been mentioned in the tweet as well, perhaps they are waiting for a dip buy or it's no longer important to buy back the 10% sold!

Could that be the reason why Tesla was at second position on the bitcoin treasure list I saw earlier, MicroStrategy was top of the list with a huge %, my point is if the intention was not to sell for profit buy to test liquidity they should buyback to prove.

I don't think it had anything to do with "testing liquidity." Tesla saw an opportunity to lock in some gains and take some of the risk they have by holding bitcoin off the table. The company is risky enough as it is without adding speculative risk on top of that. With the new Gigafactories they're building and the fact that their batteries are still lacking the major breakthrough that's been promised, Tesla has a lot of capital requirements which will require cash.

[Sithara007]

Yes in the first few hours many people were shocked, because they thought that Elon and Tesla would liquidate their bitcoin assets, but after they received information that it was only 10% and it was just to test the liquidation of bitcoin, it turned out to be good. This proves that Elon Musk and his team have the capability to control prices and the market quite well

Tesla's intention was to use Bitcoin as an alternative to fiat cash for the reserve funds. A lot of the analysts had criticized the move, saying that Bitcoin is way too volatile to be used for that purpose. But this time it worked well for Telsa and they have proven their critics wrong. I am still concerned about the tax implications from this transaction. They purchased the coins in January and sold them in April, which means that short term capital gains tax will be applicable on whatever profits they receive.

[fillippone]

A little Update:

UPDATE 1-Tesla says bitcoin investment worth $2.48 billion

April 28 (Reuters) - Tesla Inc said on Wednesday that the fair market value of bitcoin the electric carmaker held as of March 31 was $2.48 billion, suggesting it could stand to make around $1 billion dollars out of the investment were it to cash in the digital currency.

This is strange.
According to my Spreadsheet and available information, TSLA owned 38,462 BTC.
On March 31 the price was around 58,000.
This would imply a Valuation of 2.2BLN

To get to a 2.48 BLN valuation would imply a BTC quotation of almost 64,500 USD, close to the historical high.
Am I missing something?

[PrimeNumber7]

A little Update:

UPDATE 1-Tesla says bitcoin investment worth $2.48 billion

April 28 (Reuters) - Tesla Inc said on Wednesday that the fair market value of bitcoin the electric carmaker held as of March 31 was $2.48 billion, suggesting it could stand to make around $1 billion dollars out of the investment were it to cash in the digital currency.

This is strange.
According to my Spreadsheet and available information, TSLA owned 38,462 BTC.
On March 31 the price was around 58,000.
This would imply a Valuation of 2.2BLN

To get to a 2.48 BLN valuation would imply a BTC quotation of almost 64,500 USD, close to the historical high.
Am I missing something?

Where do you see that Tesla has 38,462 BTC? The only reference to specific amounts of bitcoin I was able to locate was on Tesla's 10-K that says they updated their investment policy to purchase up to $1.5 billion worth of bitcoin in January 2021. If they were buying via the OTC market, they could have purchased that coin at a discount to the market rate by waiting for a large seller (or large sellers) to be willing to sell at a discount.

[Vishnu.Reang]

I don't think it had anything to do with "testing liquidity." Tesla saw an opportunity to lock in some gains and take some of the risk they have by holding bitcoin off the table. The company is risky enough as it is without adding speculative risk on top of that. With the new Gigafactories they're building and the fact that their batteries are still lacking the major breakthrough that's been promised, Tesla has a lot of capital requirements which will require cash.

From what I have heard, they have a lot of cash in their reserves. So I don't think that they need to sell their coins to fund the gigafactories. When Tesla purchased Bitcoins worth $1.5 billion in January 2021, they claimed that the amount represented a small fraction of their reserves. So if we believe them, they are definitely not short of cash. Also, they were not that desperate to sell their coins before the 12-month period and thereby attract regular income tax on whatever gains they received.

[conected]

Yes in the first few hours many people were shocked, because they thought that Elon and Tesla would liquidate their bitcoin assets, but after they received information that it was only 10% and it was just to test the liquidation of bitcoin, it turned out to be good. This proves that Elon Musk and his team have the capability to control prices and the market quite well

Tesla's intention was to use Bitcoin as an alternative to fiat cash for the reserve funds. A lot of the analysts had criticized the move, saying that Bitcoin is way too volatile to be used for that purpose. But this time it worked well for Telsa and they have proven their critics wrong. I am still concerned about the tax implications from this transaction. They purchased the coins in January and sold them in April, which means that short term capital gains tax will be applicable on whatever profits they receive.

- The critics of this issue are not completely wrong, maybe Tesla made a fair use of their money and investment plans this time, they scrutinized and turned bitcoin into a payment method but this is still under good market conditions and they are profitable, if the buy and fail story the result now is probably the laughs of the critics. Tax problems will probably start to emerge as you said, the actions of many organizations are too public, the evasion of the law is no longer visible, ordinary investors like us would probably welcome a new tax rule

[wiss19]

I wouldn’t say that Tesla did something wrong or right, this is just an investment and as a company I believe that before they made this move they must have had a meeting discussed over it several times before they decided that it is going to be good for them, so they chose to invest their money in it. If they believe that it is the best decision for them to make, then it’s really not bad.

There have been other companies investing in Bitcoin too, from Paypal, to Microstrategy, and a lot of them that invested, even medium companies that did too which we never heard of.But all these things that has happened doesn’t mean that other companies will follow them to do the same, it’s always up to them to make the decision for themselves, if they believe that it is the right one for them, they will always go for it, but if they feel it wouldn’t be right for them, then they will always stay off.

[dikistutmazsabri]

I think Tesla is encouraging new investors and current investors to look at the market with confidence to make such a big bitcoin investment.

[Sithara007]

The critics of this issue are not completely wrong, maybe Tesla made a fair use of their money and investment plans this time, they scrutinized and turned bitcoin into a payment method but this is still under good market conditions and they are profitable, if the buy and fail story the result now is probably the laughs of the critics. Tax problems will probably start to emerge as you said, the actions of many organizations are too public, the evasion of the law is no longer visible, ordinary investors like us would probably welcome a new tax rule

I don't think that a corporation such as Tesla would indulge in tax evasion. But they could manage their cryptocurrency holdings in a more intelligent way, and thereby reduce the tax bill. It makes no sense to sell your coins before the 1-year holding period, because in that case the tax from the profit may be as high as 40%. I understand that they did the sale in order to test the market liquidity and just hope that the remaining coins will be kept for at least 3-4 years.

[fillippone]

The critics of this issue are not completely wrong, maybe Tesla made a fair use of their money and investment plans this time, they scrutinized and turned bitcoin into a payment method but this is still under good market conditions and they are profitable, if the buy and fail story the result now is probably the laughs of the critics. Tax problems will probably start to emerge as you said, the actions of many organizations are too public, the evasion of the law is no longer visible, ordinary investors like us would probably welcome a new tax rule

I don't think that a corporation such as Tesla would indulge in tax evasion. But they could manage their cryptocurrency holdings in a more intelligent way, and thereby reduce the tax bill. It makes no sense to sell your coins before the 1-year holding period, because in that case the tax from the profit may be as high as 40%. I understand that they did the sale in order to test the market liquidity and just hope that the remaining coins will be kept for at least 3-4 years.

I am not that familiar with corporate tax law in California, but are you sure there is a different tax rate for different hodling periods?
For sure this applies to personal investors in Europe (Germany, for example), but it would be the first time I hear something similar also for corporations.

[Sithara007]

I am not that familiar with corporate tax law in California, but are you sure there is a different tax rate for different hodling periods?
For sure this applies to personal investors in Europe (Germany, for example), but it would be the first time I hear something similar also for corporations.

I enquired about it, and looks like you are right. I was wrong. For capital gains of corporations, the gains are simply added to the "other income" category and taxed as per the prevailing corporate tax rate (rather than using long term/short term capital gains tax in the case of individuals). So the corporations usually pay a higher/lower tax when compared to the individuals on their capital gains (lower tax, in case their overall profit is negative).

[jaysabi]

I don't think it had anything to do with "testing liquidity." Tesla saw an opportunity to lock in some gains and take some of the risk they have by holding bitcoin off the table. The company is risky enough as it is without adding speculative risk on top of that. With the new Gigafactories they're building and the fact that their batteries are still lacking the major breakthrough that's been promised, Tesla has a lot of capital requirements which will require cash.

From what I have heard, they have a lot of cash in their reserves. So I don't think that they need to sell their coins to fund the gigafactories. When Tesla purchased Bitcoins worth $1.5 billion in January 2021, they claimed that the amount represented a small fraction of their reserves. So if we believe them, they are definitely not short of cash. Also, they were not that desperate to sell their coins before the 12-month period and thereby attract regular income tax on whatever gains they received.

On the flip side actually, selling in under 12 moths and paying higher capital gains tax is more of an argument they needed the capital. If they didn't, they wouldn't have sold and incurred a higher tax bill than was necessary if they didn't need the value in fiat.

[Sithara007]

On the flip side actually, selling in under 12 moths and paying higher capital gains tax is more of an argument they needed the capital. If they didn't, they wouldn't have sold and incurred a higher tax bill than was necessary if they didn't need the value in fiat.

I enquired about it. For corporations, capital gains tax are not applicable. Whatever gains they incur from sales of capital assets will be added to their overall income and subjected to corporate tax. In this case that suits them, because they are having a negative profit (i.e loss) from their sales of EVs for the previous quarter. So my guess is that they will be paying hardly any taxes on the $100 million plus profit that they booked with the latest sale of Bitcoins.

[jaysabi]

A little Update:

UPDATE 1-Tesla says bitcoin investment worth $2.48 billion

April 28 (Reuters) - Tesla Inc said on Wednesday that the fair market value of bitcoin the electric carmaker held as of March 31 was $2.48 billion, suggesting it could stand to make around $1 billion dollars out of the investment were it to cash in the digital currency.

This is strange.
According to my Spreadsheet and available information, TSLA owned 38,462 BTC.
On March 31 the price was around 58,000.
This would imply a Valuation of 2.2BLN

To get to a 2.48 BLN valuation would imply a BTC quotation of almost 64,500 USD, close to the historical high.
Am I missing something?

I don't know where you got the number of bitcoins from, as it's not been released in any filing and Elon has only commented in terms of USD.  It seems the number of bitcoins is off.  The author of this article (https://medium.com/coinmonks/why-teslas-bitcoin-bet-is-actually-more-significant-than-you-think-fb72c5120a39) speculates that Tesla could have purchased 46875 btc.  This is also a guess though and based on conjecture.  What's interesting though is if you take the average of your guess and this guess, the amount is 42668.5 btc, and this is actually really close to how the math breaks out based on what we know- 2.48b / 58k = 42758 btc.

[fillippone]

I don't know where you got the number of bitcoins from, as it's not been released in any filing and Elon has only commented in terms of USD.

You are right.
My numbers are based on speculations.
I will look at that article and try to improve my numbers. I might have missed some important piece of information.



EDIT:

I am estimating the buys at 39,000 USD.
This gives me, in this spreadsheet, a value of roughly 38,462 BTC.


I see in the article you posted the following:

One thing we know is, that there was a massive area of demand around 32000$ during January that could have been Tesla’s bids and based on that average price we’d look at a whopping 46875 BTC.

This looks so optimistic: looking at the Cryptoquant graph I see two major outflows in January, that might be linked to TSLA (message reported also in OP):



If I change the buying level to 33,000 USD, the amount grows to 45,455 BTC.



This would put the valuation at 1Q21 right at 2.48 billion.
Mystery solved?

[jaysabi]

I don't know where you got the number of bitcoins from, as it's not been released in any filing and Elon has only commented in terms of USD.

You are right.
My numbers are based on speculations.
I will look at that article and try to improve my numbers. I might have missed some important piece of information.



EDIT:

I am estimating the buys at 39,000 USD.
This gives me, in this spreadsheet, a value of roughly 38,462 BTC.


I see in the article you posted the following:

One thing we know is, that there was a massive area of demand around 32000$ during January that could have been Tesla’s bids and based on that average price we’d look at a whopping 46875 BTC.

This looks so optimistic: looking at the Cryptoquant graph I see two major outflows in January, that might be linked to TSLA (message reported also in OP):



If I change the buying level to 33,000 USD, the amount grows to 45,455 BTC.



This would put the valuation at 1Q21 right at 2.48 billion.
Mystery solved?

I think it's a lot closer than it was. It's all still speculation until we can get a hard number from a regulatory filing, but until then everyone is trying to piece it together based on information that has been publicly released. It's like trying to assemble a puzzle where you don't even know how many pieces there are or what shape they're supposed to be.