Tesla Incurs $170 Million Impairment Charge on Bitcoin Holdings

Tesla announced it recorded a $170 million impairment charge against the carrying value of its Bitcoin holdings for the first six month of the year, according to its 10-Q filing with the U.S. Securities and Exchange Commission (SEC). 

The electric-car maker also detailed that it gained $64 million from certain sales of its Bitcoin holdings, the filing said. 

Tesla said it must recognize impairment charges to reflect any decrease in the value of cryptocurrencies held by the company, because accounting rules define digital assets as indefinite-lived intangible assets. 

“We may make no upward revisions for any market price increases until a sale,” the company said. “These charges may negatively impact our profitability in the periods in which such impairments occur even if the overall market values of these assets increase.”

Last week, the company’s CEO, Elon Musk, said they sold $936 million worth of Bitcoin in order to recover liquidity due to its Shanghai factory closing because of local Covid-19 lockdowns. Now with 75% of their initial holdings worth $1.5 billion gone, the company owns just $218 million worth in the prized digital asset. 

Musk explained in Tesla’s quarterly earnings call that the car manufacturer is open to once again increasing their Bitcoin holdings in the future and that the recent news shouldn’t be perceived as a verdict on Bitcoin. In other words, Musk doesn’t want the recent news that Tesla sold 75% of their Bitcoin to be taken as a knock against the number one cryptocurrency by market cap. 

Instead, Musk noted that they were concerned with overall liquidity amid the Shanghai shutdown and wanted to bring some liquidity back to the company. Musk also confirmed that they did not sell any of their Dogecoin, which Tesla currently accepts as a payment method. 

Tesla briefly accepted Bitcoin in 2021, but shut it down that same year citing environmental concerns with Bitcoin mining. The South African-born billionaire tweeted in March that he won’t sell his personal Bitcoin, Ether or Dogecoin. 

In Q1, Microstrategy reported an equal $170 million impairment loss on its much larger Bitcoin position, while their Q2 numbers have yet to be revealed. 

Author: Tyler Irvin

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