Tesla selling Bitcoin last year turned out to be a $500M mistake
The price of Bitcoin (BTC) has grown by more than 50% since Tesla unveiled its approximately $1 billion BTC sales in July 2022.
Tesla infamously dumped nearly $936 million of its total Bitcoin holdings in Q2/2022, accounting for 75% of its remaining reserves, to secure a $64 million profit. At the time, Bitcoin was trading about 70% lower than its record high of $69,000 in November 2021.
Originally, Tesla purchased $1.50 billion worth of Bitcoin in February 2021 at an average price of $36,000. The company then sold BTC worth $272 million to boost its Q1/2021 accounting by $101 million.
The company has nevertheless held on to its remaining BTC as of Q4 2022 despite the price of Bitcoin sitting at bear-market lows of around $16,000 at the time. Today, Tesla holds 10,725 BTC worth around $330 million, almost 15% below the procurement value from February 2021.
Overall, Tesla made roughly $165 million in profit from two separate Bitcoin sales. As of April 14, it sits atop an unrealized loss of around $56.6 million on its remaining BTC holdings. While its net profit to date sits at around $108 million.
Interestingly, Tesla's previous Bitcoin sales came from weaker free cash flows. For instance, the Q1/2021's BTC sale worth $272 million made up nearly 93% of Tesla's free cash flows in the same quarter.
Similarly, Tesla's Bitcoin sales in Q2/2022 came as its free cash flows declined 73% versus the previous quarter. Both sales suggest that Musk relied on Bitcoin as a haven during Tesla's cash crunch phases.
The Tesla CEO explained at the time that the sale was made to “prove liquidity of Bitcoin as an alternative to holding cash on a balance sheet.”
Meanwhile, Wall Street analysts estimate that Tesla's free cash flow in Q1/2023 would
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