Tesla’s Earnings Struggles and the Impact of New Accounting Rules
Tesla (NASDAQ: TSLA) has experienced a challenging start to the year, with its stock down nearly 30% year-to-date. The company’s first-quarter results disappointed investors by missing revenue and earnings per share projections, alongside a 20% decline in automotive revenue compared to the previous year.
While there has been extensive discussion about Tesla’s difficulties, crypto investors should note a lesser-covered aspect of Tesla’s recent earnings: the company’s cryptocurrency holdings are valued at approximately $1.1 billion. Tesla owns 11,509 Bitcoins (CRYPTO: BTC) and has not sold any since 2022.
Impact of New Accounting Guidelines on Crypto
The value of Tesla’s cryptocurrency holdings surged significantly at the end of last year due to new accounting guidelines announced by the Financial Accounting Standards Board (FASB). These changes are expected to enhance cryptocurrency adoption among public companies. Starting December 2024, companies must report the fair value of any crypto assets they hold for each reporting period, shifting away from the historical cost accounting that previously dominated.
Previously, this accounting method required companies to report digital asset values at their lowest price unless sold. As a result, Tesla’s Bitcoin, acquired in early 2021 at around $30,000 per coin, was undervalued on its balance sheet. When Bitcoin’s price dropped below $16,000 at the end of 2022, Tesla’s holdings were stuck at a reported value of $15,987. Despite price gains, Tesla’s balance sheet reflected only the low valuation until the new rules came into effect.
In Q4 2024, with the implementation of these new rules, the value of Tesla’s Bitcoin holdings jumped to over $1 billion. This resulted in a recorded gain of $600 million on its balance sheet, representing nearly a quarter of its $2.3 billion net income for that quarter.
Tesla’s Strategic Moves with Bitcoin
Tesla’s relationship with Bitcoin has been complex. Initially, Tesla announced plans to accept Bitcoin for vehicle purchases in 2021, which contributed to a price surge. However, CEO Elon Musk later suspended this decision due to environmental concerns. In Q2 2022, Tesla sold 75% of its cryptocurrency holdings but remains the fifth-largest corporate holder of Bitcoin today. Tesla owns about 0.06% of the total 21 million Bitcoins available.
Growing Corporate Interest in Bitcoin
Recent reports from Bitwise indicate that 12 new public companies invested in Bitcoin in Q1 2025, bringing the total number of public company investors to 79. Collectively, these companies now hold 688,000 Bitcoins, with over 95,000 Bitcoins acquired by public companies in Q1 alone, representing 16% of total holdings.
The ongoing shift toward Bitcoin investment can be attributed not only to new reporting rules but also to companies diversifying their portfolios as a hedge against inflation and market uncertainties. For instance, Strategy, a software firm, has seen its Bitcoin holdings increase by more than 200% since last May.
Despite these changes, investing in cryptocurrency remains risky for both public companies and individual investors. The volatility of Bitcoin prices can significantly impact financial performance, and it is essential to consider tax implications as well.
Conclusion
Tesla’s latest earnings reports didn’t present many positives; however, the growing corporate interest in Bitcoin stands out. Not only did it provide a significant boost to Tesla’s income from its earlier crypto investments, but it also underlines the benefits of the new accounting standards.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
