In January 2021, Tesla made a $1.5 billion investment in Bitcoin. Bitcoin was worth more than $30,000 at the time. Tesla’s carrying value on the nearly 42,000 coins retained was over $1.26 billion at the end of the first quarter of 2022, after a few gains and losses. Tesla, the leader in electric vehicles, may have a wild second quarter. First, production issues arose as a result of CV-19 lockdowns in China. There is now the issue of their Bitcoin holdings. Tesla would most certainly have to register a big loss from its Bitcoin holdings in its second-quarter earnings report, due to recent price losses in Bitcoin. Bitcoin was falling sharply on Wednesday, edging closer to the psychologically significant $20,000 mark.
Bitcoin’s market value was estimated to be at approximately $2 billion. The value of Bitcoin, however, is not recorded on a company’s balance sheet from quarter to quarter. They only record profits or losses on sales, as well as losses when Bitcoin trades for less than what was paid for it. It’s a unique Bitcoin accounting quirk. It’s considered more like a piece of machinery than a medium of exchange. Tesla has realized approximately $128 million in gains and $101 million in losses as a result of the original $1.5 billion purchase over time.
Based on the price Bitcoin is selling at today, Tesla is expected to incur a pretax loss of over $360 million in the second quarter of 2022. That works out to around 35 cents per share. Investors should consider it a one-time cost, and Bitcoin is unlikely to make or break second-quarter earnings. However, that is only a guess. It’s impossible to predict how investors will respond to a one-time charge.
Tesla is expected to make around $2.10 per share in the second quarter, down from $3.22 in the first quarter of 2022, according to Wall Street. The $2.10 figure is unlikely to contain any Bitcoin impairment. Production has also caused a reduction in estimates. Tesla is expected to deliver 250,000 to 270,000 units in the second quarter, according to analysts. This is down from a first-quarter record of 310,048 automobiles delivered. Because of CV-19 lockdowns in Shanghai, production for Tesla, as well as the entire Chinese car sector, was curtailed in the second quarter, and delivery forecasts have decreased and are wide-ranging.
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