Tesla sells off majority of bitcoin, blaming COVID-19 lockdowns in China

Bitcoin and Tesla
"[Musk's] personal flair is starting to raise governance questions." Photo credit: Getty Images

Elon Musk's electric vehicle company Tesla has revealed it has sold 75 percent of its bitcoin holdings amid a downturn in the cryptocurrency market.

In the company's Q2 2022 financial report it was revealed that US$936 million in cash had been added to its balance sheet following the sale of the majority of its cryptocurrency.

It follows the company's US$1.5 billion investment in bitcoin last year, during which it briefly accepted the cryptocurrency for payment for cars, but then changed its mind.

Musk, the controversial billionaire who is being sued by Twitter to force him to complete his US$44 billion takeover, addressed the sale in a call with analysts.

He said the reason it was sold was to "maximise our cash position given the uncertainty" of ongoing COVID-19 lockdowns in China.

He also said Tesla was open to increasing its bitcoin holdings in the future and said it hadn't sold any of its dogecoin cryptocurrency.

"It's unclear exactly how much the group lost to the sell-off in crypto, but… most of the damage has been recognised," Laura Hoy, analyst at Hargreaves Lansdown, told Reuters.

"However, the bitcoin losses point out an important part of the Tesla investment case - its eccentric owner. While Musk's impressive innovation has served the company well, his personal flair is starting to raise governance questions," she said.

The latest report valued the company's remaining "digital assets" at US$218 billion, down from US$1.2 billion in previous quarters.

However some online have raised questions over Musk's motivation for selling off the bitcoin holdings while the price of the crypto is far below its market high.

"Tesla dumps 75 percent of their Bitcoin. Did they do this to prevent a negative cash flow this quarter? Looks like it," financial analyst MeetKevin wrote on Twitter.

"Cash flow statement shows US$922m cash flow bonus from bitcoin sale. Cash flow change was US$847m. That means without cash from bitcoin sale, Tesla would have been cash flow negative," he continued.

"Feels like earnings were dressed up."

As well as the bitcoin revelation, the company reported it made US$2.26 billion in profit in the quarter, down 31 percent from Q1. That was earned on revenue of US$16.9 billion, down from US$18.7 billion in the previous quarter.