Updated 02 Aug, 2021

Tesla Reports $23 Million Impairment Charge from Bitcoin Holdings

impairment charge


Key Takeaways:

  • Tesla’s Q2 earnings report says the company took a $23m impairment charge from its bitcoin stack
  • The quarterly figures revealed Tesla made a profit of $1.1bn

Tesla Takes an Impairment Charge of $23 Million on Bitcoin Holdings

Electric-vehicle maker Tesla Inc. reported its quarterly earnings last week, which included the company’s results from its bitcoin holdings.According to the released statement, for the second quarter of 2021, Tesla had recorded $23m in bitcoin-related impairments, reflecting the cryptocurrency’s weak performance at the end of the second quarter.

Tesla’s earnings report was largely positive. The EV maker exceeded $1bn in profits for the first time in its history. Moreover, the net income was ten times larger what it was in the same quarter a year ago. The stronger-than-expected growth for the company arrived as more than 200,000 vehicles were both produced and delivered during the quarter.

In the earnings statement by Tesla, the company notes it has marked down “Bitcoin-related impairment of $23M.” The reported impairment was better than the $100m some analysts had expected. The company had decided to place the result as an operating expense under the “Restructuring and other” category. The book value of Tesla’s bitcoin holdings at the end of the quarter, according to the released figures, stood at $1.31bn, down from $1.33bn in the previous quarter.

Elon Musk’s Contradictory Stance Toward Bitcoin

Since bitcoin in Tesla’s treasury is considered an “indefinite-lived intangible asset”, it must be evaluated for impairment. The company, however, does not revalue its bitcoin holdings upwards when the price rises, meaning any stellar rally in bitcoin will not be reflected in a quarterly statement, unless some amount of the cryptocurrency had been liquidated.

Tesla CEO Elon Musk has been keeping a rather contradictory approach to the leading digital currency. Once the company famously purchased $1.5bn worth of bitcoin in February, Mr. Musk was widely regarded as the biggest and most influential bitcoin supporter from any mainstream company. Raising hopes for mass adoption, Mr. Musk announced in March Tesla cars could be purchased with bitcoin.

His reputation took a hit, however, when he said in May bitcoin is no longer accepted as payment for Tesla’s electric vehicles. Elon Musk said that Tesla would bring back bitcoin as payment if at least half of the energy used to mine the cryptocurrency came from renewable sources. Environmental concerns were cited as the main reason for his decision.

More recently, in an online conference called “The B Word”, Elon Musk said he believed in bitcoin and wanted to see it succeed.