[Wayne 962]

On a related topic, I also wanted to post a prediction for the future (which may or may not happen). So, it may be likely that Bitcoin will remain below the price on February 8th for quite a while. That date is significant because that's the date that Elon announced that Tesla had purchased $1.5 billion ($1,500 million) of Bitcoin. Strangely and surprisingly (typical Elon-style), as we all know, he basically trashed his own $1.5B investment by stating that Tesla would no longer accept Bitcoin due to environmental concerns:

Elon Musk: "We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel. Cryptocurrency is a good idea... but this cannot come at great cost to the environment."

It's estimated that Elon's original purchase of Bitcoin for Tesla was $34,700. This is based upon the SEC 10K filing that Tesla made recently:

https://fortune.com/2021/04/27/tesla-tsla-bitcoin-btc-bet-how-much-has-it-made-elon-musk-profits/

April 27, 2021- How much has Tesla made on Bitcoin?

Ever since Tesla announced its $1.5 billion Bitcoin purchase in the 10K, issued on February 8, it's been clear that the EV-maker's been harboring big gains. Still, the Q1 report provides new detail on the approximate price Tesla paid, how many coins remain on its balance sheet, and how much it's made on its big wager. The numbers also reveal a troubling truth: In the first quarter, the digital currency's appreciation dwarfs what Tesla earned in its bedrock business of selling cars and batteries, and providing software updates and other services.

Accounting rules classify digital currencies as "indefinite-lived intangible assets." If at the end of a quarter, the price of Bitcoin falls below what the company paid, it's required to take an "impairment" charge reflecting the size of the hit. But if the price rises, the owner doesn't show that appreciation on the balance sheet. The holdings are still shown at the amount or "book value" the company originally paid.

The big profit recorded in Q1 reveals the approximate size of the overall windfall. A note on page 5 discloses that Tesla booked a $101 million "positive impact" from the sale of Bitcoin, recorded in the 'Restructuring & Other' line on the income statement. The cash flow statement shows that the sale garnered proceeds of $272 million. Hence, we know that Tesla paid $171 million for Bitcoin it sold for $101 million more, clinching a 59% profit. On the conference call, CFO Zach Kirkhorn stated that the transaction happened "later in March."

Bitcoin's price was uncharacteristically steady in the last three weeks of March, averaging $55,100. So the math suggests that Tesla sold around 4,800 Bitcoins at that price to raise the $272 million. We also can reckon what Tesla originally paid for its stake. Since it pocketed a 59% gain on every Bitcoin sold, its original cost must have been about $34,700. Makes sense. That's close to the average quote in the January to early February period that bookends Tesla's purchases. It appears that the $1.5 billion investment bought roughly 43,000 Bitcoin.

Once again, the book value––or what it paid––for the tokens sold is $171 million. So we know the approximate balance-sheet number for what remains is the original investment of $1.5 billion, less the $171 million, or about $1.329 billion.

Result: Tesla still holds around 38,300 Bitcoin that cost $1.329 billion. At Bitcoin's price of $54,100 on April 26, Tesla's trove is worth over $2.07 billion. Tesla's gain on what it still owns is $741 million. Add the $101 million from the Q1 sale, and its total take is $842 million.

These numbers are approximate, but present what should be close to the full picture. On its balance sheet, Tesla displays its "digital currency" holdings at $1.331 billion. That's $2 million more than the number I get from deducting the sale from its original purchases. But on the earnings call, Kirkhorn said that Tesla "continues to accumulate Bitcoin from transactions from our customers as they purchase vehicles." Musk's famous declaration in February that Tesla would accept the coins in lieu of dollars or yuan may well explain the $2 million discrepancy. If forty customers opened their Bitcoin wallets to buy or make deposits on $51,000 Model 3s, those sales would account for the extra $2 million-worth in Tesla's coffers.

And here is an opinion further down in that article that I somewhat agree with:

Excluding the $101 million profit, its appreciation from the Bitcoin foray amounted to well over $700 million. Despite that bounty, the decision to tie Tesla's fortunes to an ultra-volatile investment was a poor one. Given the crypto's wild fluctuations, the big holding will only make Tesla's already uncertain profitability harder to forecast. What Tesla investors don't need more of is risk. Instead of gorging on Bitcoin, Musk could pay a special dividend with this excess cash, and let shareholders decide whether to buy Bitcoin or do something else with the cash.

If Tesla hasn't already sold it's Bitcoin holdings, then it will have to declare a huge loss on it in their Q2 report, assuming the Bitcoin price doesn't bounce back. So, my prediction is that Elon will face a rash of shareholder lawsuits from angry shareholders who feel that the CEO risked a large portion of the Tesla cash pile on a huge speculative asset - insanely being one that he tanked himself!

What an odd period in time we have going on right now...

-Wayne