Tesla and MicroStrategy released Q3 earnings reports. Did they lose money on Bitcoin investment?

Recently, news about Tesla and its CEO Musk has once again increased. Not only the rise in Tesla’s stock price has pushed its total market value into the trillion-dollar club, but also in the dynamics of Tesla and Musk. The long-lost news about digital asset investment has appeared again. Just four days before the market value of Tesla broke the trillion-dollar mark, on October 21, Tesla released its third-quarter financial report. According to its financial report, Tesla’s third-quarter revenue reached 13.76 billion US dollars. ; For the part of Bitcoin holdings that crypto investors are more concerned about, Tesla’s financial report revealed that the company had no new digital asset sales or purchase records in the third quarter, and the total value of its digital assets (mainly Bitcoin) It was 1.26 billion U.S. dollars and recorded an impairment charge of 51 million U.S. dollars.

Does the “impairment” in Tesla’s earnings report mean losing money?

If you are not a professional, when you see the description of the “$51 million impairment charge” recorded in Tesla’s third-quarter financial report about digital asset investment, most of them may associate it with a “loss”, but is this the case? Obviously not. Whether it is from the perspective of the Bitcoin price trend in the crypto market in the third quarter or from the professional financial accounting rules, this is a misunderstanding.

We have introduced in tracking Tesla’s second quarter financial report. According to a public report on the Fortune website, according to the classification of the Financial Accounting Standards Board of the United States, digital assets represented by Bitcoin are “intangible assets with uncertain maturity.” “This means that the company has a lot of freedom in how to deal with encrypted assets in the balance sheet. Within the current rules, there are two main ways. The first is to compare the purchase price of Bitcoin with the fair market value at the end of the quarter. For example, if the Bitcoin price on September 30 is lower than Tesla’s average purchase price of Bitcoin, it will be included in the “impairment”, and the “impairment amount” is equal to the “purchase price” minus the “quarter “End market price”, if there is a profit, it is calculated according to the purchase cost; the second method is the any-time impairment method, that is, as long as the market price of Bitcoin is lower than the purchase price of any part of the currency during the quarter, it will be calculated Impairment. For example, if Tesla bought some bitcoins for 35,000 US dollars in early February, and on May 19th, the bitcoins fell below 30,000 US dollars, then this part of bitcoins would have to be 5,000 US dollars. Impairment, even if Bitcoin rebounds back to more than $30,000, Tesla cannot recalculate the currency price and eliminate the impairment, and the impairment will always exist.

Looking back at Tesla’s financial report for the first quarter, it can be seen that Tesla sold 10% of its holdings in the first quarter, with revenue of US$272 million and net profit of US$101 million. Bitcoin rose sharply throughout the first quarter. In the case of Bitcoin’s closing price of $59,286.3 on March 31, Tesla made an impairment of $27 million. It can be seen that a small part of the Bitcoin bought by Tesla fell below the original cost, which triggered This impairment, so we can infer that Tesla uses the second method “anytime impairment method.”

After clarifying the method used by Tesla, the following process of calculating its true profit and loss is very simple. According to statistics from OKLink chain masters, there are currently 43 companies with publicly verifiable holdings of Bitcoin as value reserves, holding a total of 558,600 Bitcoins, and the total current holdings are worth 34.144 billion U.S. dollars, accounting for Bitcoins. 2.93% of the total market value of the currency.

Tesla and MicroStrategy released Q3 earnings reports. Did they lose money on Bitcoin investment?

Overview of Bitcoin holdings of some listed companies and private companies, data source OKLink master on the chain

Among them, Tesla holds 40,900, ranking fourth among all Bitcoin-holding companies, accounting for 0.22% of the current total Bitcoin in circulation. According to the latest quotation of Bitcoin on the Ouyi OKEx platform (about 61,600 US dollars) /Per BTC ), the current total value of its holdings is about 2.498 billion U.S. dollars, and from the statistics given by the masters on the OKLink chain, it can be seen that the total cost is about 1.3 billion U.S. dollars. From this rough calculation, In the statistical cycle of pulling the third-quarter earnings report, Tesla made at least $1 billion in profits.

What did MicroStrategy ‘s third quarter earnings report say?

Following Tesla, on October 28, 2021 local time, another listed company holding a large amount of Bitcoin, MicroStrategy, also announced its third-quarter financial results. After funding (for details on this part, please refer to the article “MicroStrategy wants to issue more bonds to increase Bitcoin, but will anyone pay after the $285 million depreciation?”), MicroStrategy has significantly increased Bitcoin holdings. Yes, nearly 9,000 bitcoins were added in the third quarter.

According to the financial report, as of September 30, 2021, MicroStrategy held 114,042 bitcoins with a book value of US$2.406 billion. The accumulated impairment loss since the acquisition was US$754.7 million, and the average book value per bitcoin was approximately US$21,095. According to the calculation method of the digital asset part of the current US accounting rules we mentioned above, if the asset price is lower than the company’s purchase price at any time in the quarter, the company needs to report the impairment to the US Securities and Exchange Commission (SEC).

In addition, in the latest financial report released by MicroStrategy, we also found that as of September 30, 2021, the original cost and market value of MicroStrategy Bitcoin were 3.160 billion U.S. dollars and 4.965 billion U.S. dollars, respectively. This data is similar to the OKLink shown in the figure above. The statistical information is basically the same. From this point of view, MicroStrategy is still the world’s largest listed company holding Bitcoin so far. The company also stated that it will continue to evaluate future opportunities and raise additional funds to execute the Bitcoin strategy. According to the current Bitcoin price of Ou Yi OKEx platform, the value of Bitcoin held by it is nearly 7 billion U.S. dollars. In contrast, the total market value of MicroStrategy’s stock is about 7.4 billion U.S. dollars.

In “MicroStrategy wants to issue debts to increase the position of Bitcoin, will anyone pay after the $285 million depreciation?” “In the article, we briefly introduced MicroStrategy’s crazy buying behavior in the Bitcoin market, and the company’s CEO Michael Saylor’s pivotal influence in the crypto world. MicroStrategy’s debt issuance and increase in Bitcoin took place in early June of this year. After reporting to the US Securities and Exchange Commission that it expects at least $284.5 million in impairment losses on Bitcoin investments in the second quarter, MicroStrategy immediately announced that it would issue value 4 100 million US dollars (later raised to 500 million US dollars) senior secured notes (Senior Secured Notes) for the purchase of Bitcoin, with an annual interest rate of 6.125%, maturing in 2028, MicroStrategy soon received the bond issuance financing information The 1.6 billion US dollar order is 4 times its initial seeking amount. Now when we look back at MicroStrategy’s seemingly crazy move, we have to admit its accuracy and long-term vision of the crypto market trend. We must know that the entire crypto market was shrouded in the haze of the extreme downturn on 5.19. Among them, pessimism is spreading, and MicroStrategy’s behavior to increase positions against the trend requires considerable courage.

Looking at the current situation and the development of the market so far, the crypto market has successfully emerged from the pessimism in the second quarter. Not only the total market value of the crypto market hit a new high in the third quarter, but the price of Bitcoin also broke the record in mid-April, reaching 6.7 at one point. Ten thousand U.S. dollars, in the near future, Bitcoin has also closed above 60,000 U.S. dollars for 7 consecutive days, giving market investors more confidence.

Tesla and MicroStrategy released Q3 earnings reports. Did they lose money on Bitcoin investment?

Bitcoin’s recent price trend, data source OKEx

Although the two representatives we selected in this article have achieved good results in Bitcoin investment, as we have always emphasized, in any investment market, especially in the high-risk market environment of digital assets In order to achieve better investment results, every investor should always maintain awe of the market and put risk control in the first place.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/tesla-and-microstrategy-released-q3-earnings-reports-did-they-lose-money-on-bitcoin-investment/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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