Tesla Simply Trimmed its BTC Position, Which Remains Increased as a Percentage of its Balance Sheet
While CEO Elon Musk points to liquidity, CFO reiterates the company's long-term belief in the value of Bitcoin.
Electric car maker Tesla released its earnings report, which revealed that the company sold a small portion of their $1.5 billion Bitcoin investment.
Tesla sold about 10% of its holdings and generated $101 million in income from it.
But of course, the BTC sold wasn’t at the cost of acquisition. Tesla’s $1.5 billion investment was already doubled, increased in value by $1.7 billion. The company only sold $272 million out of the total increased holdings in USD terms at $3.2 billion.
Tesla just trimmed its position, and as Nic Carter of Coin Metrics noted a few days back, many allocators have target bands, and they aim to keep the share of their portfolio relatively fixed.
“So if BTC rallies, they take profits, and if BTC sells off, they buy. This is countercyclical & suppresses volatility,” he said at the time.
I'm not saying this is sound, but a lot of allocators target a specific quantity of risk (as measured by volatility). so they will construct a BTC/gold portfolio according to a defined level of risk, sizing accordingly (more volatile -> smaller share of portfolio)
— nic carter (@nic__carter) April 13, 2021
Reporting a $272 million gain on “digital assets,” the company said on Monday that it generated $101 million in income from the Bitcoin Investment that helped it beat analysts’ estimates for profit in the first quarter.
Bitcoin accounted for much of Tesla’s record profit in Q1 as stripping out the Bitcoin gain, Tesla’s adjusted net income was $337 million, roughly the same as the Q3 2020 at $331 million.
The crypto market was initially perturbed by the news, and the price of Bitcoin dipped about 3.3%. But soon, the concerns were lifted as CEO Elon Musk explained,
“I have not sold any of my Bitcoin. Tesla sold 10% of its holdings essentially to prove liquidity of Bitcoin as an alternative to holding cash on balance sheet.”
The price then went even higher, and currently, it is trading around $55k, as Tesla’s chief financial officer further reiterated the company’s commitment to the cryptocurrency.
“We do believe long-term in the value of Bitcoin,” CFO Zachary Kirkhorn said on the conference call. “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.”
This is solid perspective on Tesla's actual positioning on BTC.
I reacted negatively to the news at first too, but reality is TSLA holds more BTC as a percentage of their balance sheet today than they did when they first bought. https://t.co/XJVHpbsKCh
— Ryan Watkins (@RyanWatkins_) April 26, 2021
The company reported a record quarter with its automotive gross profit margin at 25.8% or 21.1% after slashing the regulatory credits. In absolute dollar terms, this was the biggest quarter ever at about $2.25 billion.
Vehicle deliveries also set a new record recording an increase of 31%. But model S and X only had 2,000 deliveries, 89% fewer than the last quarter.
Tesla, which has been leading the global market with a 24% market share, sees a slight drop as the share of other companies like Volkswagen AG is seeing a jump, from 4% to almost 9%.
But according to Tesla, “As more OEMs join our mission by launching EVs, we believe consumer confidence in EVs continues to increase, and more customers are willing to make the switch,” it said in a statement.