Tesla sells Bitcoin For A 59% Profit And Reveals New Strategy To Ensure Consistent Profitability
In an SEC filing back in February, Tesla announced the company has bought 1.5 billion dollars worth of bitcoin.
At the time the company also said it will start accepting the cryptocurrency for customers who chose to pay in bitcoin rather than fiat currency (such as US dollar, Euro, or any other currency issued by a government).
This caused a minor uproar in the financial media claiming Elon Musk had broken the law by simultaneously pumping bitcoin price as Tesla secretly acquired the cryptocurrency.
Soon after, Tesla made good on its promise and started allowing customers in the US to order and pay the full price of their vehicle in bitcoin. The company also posted detailed instructions customers should follow if they want to pay in bitcoin.
During the announcement, Tesla wrote in an SEC filing, “We expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.”
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However, on his favorite social media platform Twitter, Elon Musk said Tesla will not be converting bitcoin received as payment to fiat currency. This even led people to jokingly claim Elon Musk is using Tesla vehicles to acquire bitcoin.
Tesla is using only internal & open source software & operates Bitcoin nodes directly.
Bitcoin paid to Tesla will be retained as Bitcoin, not converted to fiat currency.
— Elon Musk (@elonmusk) March 24, 2021
However, after the markets closed on Tuesday, Tesla released the company’s Q1 2021 earnings report and in it, Tesla announced it sold 272 million dollars worth in bitcoin.
The company also wrote “positive impacts from volume growth, regulatory credit revenue growth, gross margin improvement driven by further product cost reduction and sale of bitcoin (101M positive impact).
A $101M profit for the sale of 272 million dollars worth of bitcoins adds up to be a 59 percent profit for the EV maker.
This shows Tesla’s financial acumen. When Tesla announced it had bought $1.5 billion worth of bitcoin, so-called financial experts were quick to jump on the company saying how irresponsible the move is.
However, once again Tesla has been proven right in the unconventional first principle approach the company takes to everything including purchasing bitcoin.
Zack Kirkorn, Tesla’s chief financial officer in the earnings call said “we trimmed 10% of our bitcoin position”, this means Tesla is still in possession of 90% of the bitcoin the EV maker purchased.
And that is in addition to whatever amount of bitcoin the company will receive by selling vehicles directly in bitcoin.
Since Tesla is already strongly in the black with its bitcoin purchase, this means the EV maker can use selling bitcoin to ensure the company always posts a profitable quarter.
For Q1 2020 Tesla posted GAAP net income of $438M, off this $101M was made up of the profit the company made from the sale of bitcoin.
This shows how going forward Tesla can use bitcoin sale as a dial that it can turn up or down to ensure every quarter is profitable.
So what do you think? Now Tesla can use bitcoin sale to boost the company’s bottom line whenever it deems necessary, do you think Tesla will only post a profitable quarter going forward?
Also, what do you think about Tesla trimming its bitcoin position? A sound financial move? or short-sighted action to bolster quarterly profit? Let me know your thoughts down in the comments below.
For more information check out: Tesla Gives Owners Easy Access to Crash Data Also, see Tesla "Apologizes Deeply" In Response To China Communist Party Criticism.
Tinsae Aregay has been following Tesla and The evolution of the EV space on a daily basis for several years. He covers everything about Tesla from the cars, to Elon Musk, the energy business and autonomy. Follow Tinsae on Twitter at @TinsaeAregay for daily Tesla news.