Tesla misses $300 million profit after Bitcoin sales
Tesla's refusal to “hodl” Bitcoin (BTC) missed an opportunity to make more than $300 million in profits.
Tesla's Bitcoin investment strategy so far
Tesla's foray into Bitcoin began in February 2021 with a $1.5 billion investment. At the time, the price of BTC was around $36,000.
Since the first BTC balance reported on February 8, 2021, Tesla's stock price has fallen by about 40% against Bitcoin, notably:
TSLA vs. BTC: -40.1%BTC vs USD: +7.39%TSLA vs. USD: -35.7%
However, surprisingly, Tesla sold 10 percent of its holdings in March 2021. Then, in the second quarter of 2022, the company sold 75 percent of its Bitcoin stock. According to Tesla CEO Elon Musk, these sales are intended to demonstrate Bitcoin's liquidity and strengthen Tesla's balance sheet during uncertain financial times.
If Tesla had kept the entire Bitcoin investment, the company could have seen a hypothetical profit of over $300 million, considering the current Bitcoin price of approximately $41,500.
However, the company's remaining Bitcoin holdings, estimated at around 9,720 BTC, have remained steady in recent quarters, reflecting a more conservative approach in what traders expect will be a bullish year for Bitcoin.
Tesla still holds 9,720 #Bitcoins worth $385M and hasn't sold anyone Q4, 2023. pic.twitter.com/lFFBy6v9I4
— Radar (@RadarHits) January 25, 2024
Tesla may not sell remaining Bitcoin.
Interestingly, Tesla's previous bitcoin sales appeared in a quarter that reported poor free cash flow. Cash is the cash that a company generates after spending money needed to maintain or grow its business.
For example, in the first quarter of 2021, Tesla's Bitcoin sales were estimated at $272 million, an impressive 93 percent of the company's free cash flow during that period.
Similarly, in Q2 2022, Tesla's 73% drop in free cash flow was linked to its Bitcoin sales.
Related: X launches a dedicated payment account, crypto community speculates
Simply put, Mook is relying on BTC to shore up financing during Tesla's tight cash flow. With Tesla's free cash flow increasing in 2023, it may not need to use the same strategy now.
In Q4, 2023, for example, Tesla's free cash flow was strong at $2.1 billion, contributing to a total of $4.4 billion for the year.
$TSLA Tesla Q4 FY23:
• Revenue +3% Y/Y to $25.2B ($0.6B loss).• Gross margin 18% (-6pp Y/Y).• Operating margin 8% (-8pp Y/Y).• Capex +24% Y/Y. Y to $2.3B com/pnOzZkCAde
— App Economy Insights (@EconomyApp) January 24, 2024
Many analysts predict the price of Bitcoin to rise in 2024, with their optimistic approval of US-based bitcoin exchange-traded funds and the upcoming Bitcoin halving event expected to be key drivers behind their predictions.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
