[2022-06-14] Tesla could take a big loss on its Bitcoin bets

[franch]

Tesla’s (NASDAQ:TSLA) big bet on Bitcoin (BTC-USD) is beginning to look like a blunder amid a violent crash for cryptocurrencies.

While adding Bitcoin (BTC-USD -14.6%) in early 2021 looked like a wise decision throughout the year and even into early 2022, the tables have turned rather quickly in recent months. The price of Bitcoin specifically has fallen just over 50% in the current quarter, which bodes poorly for Tesla’s (TSLA -7.1%) upcoming quarterly report.

With shares down nearly 50% year to date, bookended by an over 7% drop on Monday, the Bitcoin issue adds yet another headwind to contend with as a number of adverse impacts bear down on the Austin-based automaker.

Source: https://seekingalpha.com/news/3848254-tesla-could-take-a-big-loss-on-its-bitcoin-bets?utm_source=coinmarketcap.com&utm_medium=referral

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[NeuroticFish]

As long as TSLA doesn't sell, it's only unrealized loss. That has a chance to become profit again after some more years.
However, it's interesting to see how will the institutional investors behave now, as "crypto winter" seems to be here.
Since they didn't sell for profit at close-to-ATH levels, I don't expect them to panic-sell now, but "never say never", I know...

[DooMAD]

If I have enough sense and fortitude to HODL, I'd imagine a multi-billion-dollar company would as well.  They probably didn't obtain their current net worth by making rash decisions. 

And even if they did make a loss, it would barely make a dent in the grand scheme of things.  They'd still likely be a multi-billion-dollar company, which is more than most businesses will ever manage.

[bbc.reporter]

As long as TSLA doesn't sell, it's only unrealized loss. That has a chance to become profit again after some more years.
However, it's interesting to see how will the institutional investors behave now, as "crypto winter" seems to be here.
Since they didn't sell for profit at close-to-ATH levels, I don't expect them to panic-sell now, but "never say never", I know...

I am quite certain that it is more complicated than what it appears to be for public companies similar to Tesla. The unrealized loss will be reflected in their income statement and a public company, they would like this to be positive. This could negatively impact them as a company and on their stock price.

@DooMAD. It might depend on Elon Musk and Tesla's board of directors if they continue to hold. However, I reckon that it will be a business decision instead of their mental fortitude.

It might be a mistake to make a comment by using our own set of conditions because they have a much complicated situation than us.

[NeuroticFish]

I am quite certain that it is more complicated than what it appears to be for public companies similar to Tesla. The unrealized loss will be reflected in their income statement and a public company, they would like this to be positive. This could negatively impact them as a company and on their stock price.

That's clear. The official papers will look bad and they will have to find ways to sugarcoat that in order to keep the investors - big or small - not-too-unhappy, especially as those investors don't know nor care about 4-year cycles, limited supply or technological marvel. But I think that they know that if they sell it's not only the papers looking bad, it'll be the actual reality too.
Also, while the situation may be pretty much similar for all the big investors into bitcoin, the way it's reflected on the quarterly balance may differ and the actions they'll take or not, again, may be different.
That's why, while I think they won't sell, I cannot be sure. And that's why I said it'll be interesting to see what's going to happen next with these companies.

[bbc.reporter]

@NeuroticFish. It will certainly look very bad. We should wait for the report on their conference call on earnings for the 2nd quarter. This will be on July 25. If bitcoin and the whole cryptospace continues to dump and if there will be an economic recession, I speculate Tesla might be forced to question their bitcoin investment. What assets would they sell first if they need more liquidity for their cashflow? Their bitcoin investment might begin to look very shiny hehe.

[DooMAD]

@DooMAD. It might depend on Elon Musk and Tesla's board of directors if they continue to hold. However, I reckon that it will be a business decision instead of their mental fortitude.

It might be a mistake to make a comment by using our own set of conditions because they have a much complicated situation than us.

That's fair.  I certainly don't have shareholders to answer to, or an R&D budget to worry about, or the kinds of expenditures a major company might face.  I'm also not engaged in a space-race as far as I can recall.  

Although I'd still be surprised if they elected to sell at a big loss.  

[Lucius]

Big losses because Tesla bought some 40k Bitcoins (of which they sold 10% at a profit)? An investment of $1.5 billion for a company whose net worth is currently just under $700 billion literally means a drop in the ocean, especially if we take into account that the investment was made at a time when the price of BTC was around $30k.

The fall in the company's share prices cannot, therefore, be linked to the fall in the price of Bitcoin, although some will be very happy to use it to put Bitcoin in a negative context.