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Tesla’s recent Q2 report reveals that the EV company sold $936 million in Bitcoin to help with COVID-triggered liquidity concerns.
In its second-quarter earnings report, Tesla Inc (NASDAQ: TSLA) revealed that it sold $936 million worth of Bitcoin (BTC). This represents a massive 75% reduction of the company’s Bitcoin portfolio, leaving its holdings at $218 million.
Following Tesla’s decision to offload such a large BTC stake, chief executive officer Elon Musk moved to assuage investors. At a presentation on Wednesday, Musk explained that the company has not ruled out increasing its bitcoin holdings in the future. Furthermore, the Tesla CEO stated that the company sold 75% of its holdings out of liquidity concerns due to covid shutdowns in China. Musk suggested that the sale was not indicative of any gloomy forecast for BTC and should not be seen as a “verdict on Bitcoin.”
Tesla listed the Bitcoin sale under the “proceeds from sales of digital assets” category in its second quarter report. In addition, the electric vehicle manufacturer also reported $106 million in charges on its remaining token holdings, alongside other impairments. These combined to offset the proceeds realized from the substantial sale of the major digital currency.
Recap of Tesla Association with Bitcoin
At the beginning of last year, Tesla bought a staggering $1.5 billion in Bitcoin, according to an SEC filing in February 2020. At the time of its purchase, Tesla identified BTC and other cryptos as very important strategic investments. In addition, the EV manufacturer and its crypto-loving CEO also suggested similar crypto acquisitions going forward. At some point, Tesla also flirted with accepting crypto as payment for its electric vehicles. At the company’s Q1 2021 earnings call, chief financial Officer Zach Kirkhorn said at the time:
“[Tesla] believes, long term, in the value of Bitcoin, so it is our intent to hold what we have long-term and continue to accumulate Bitcoin from transactions from our customers as they purchase vehicles.”
Tesla initially began taking BTC payments in March 2021, but suspended them a short while afterward in May. Musk posted a tweet explaining the suspension, in which he raised concerns about “rapidly increasing use of fossil fuels for bitcoin mining and transactions”. In addition, the Tesla CEO said his company would reconsider accepting BTC as a payment form if miners deployed more sustainable energy sources.
In the first quarter of 2021, Tesla sold $272 million worth of its Bitcoin holdings. This left the firm with roughly $1.33 billion in BTC, going by prices at the time of the transaction.
Takeaways from Tesla Q2 Financial Report
In its Q2 report, Tesla’s revenues dropped 9.7% to $16.9 billion from the first quarter of 2022. In addition, the EV firm’s gross profit of $4.2 billion is also down 22.5% from the first quarter. Tesla explained that despite the headwinds, mainly from Shanghai’s covid restrictions, the operating margin came in at 14.6%. The company claims this ranks among the highest in the industry.
Tesla reported a positive free cash flow of $621 million and said Q2 is its highest vehicle production month in its history.