In January 2021, Tesla made a $1.5 billion investment in Bitcoin. Bitcoin was worth more than $30,000 at the time. Teslaโs 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.
Bitcoinโs market value was estimated to be at approximately $2 billion. The value of Bitcoin, however, is not recorded on a companyโs 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. Itโs a unique Bitcoin accounting quirk. Itโs 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. Itโs 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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