A risky investment didn’t pay off for the tech company – and they had to admit the mistake very publicly.
Electric vehicle giant Tesla lost US$101 million (Australian $141 million) after a risky gamble failed to pay off.
The tech company revealed in its annual report to the U.S. Securities and Exchange Commission, released last Friday, that it took a hit to its finances due to its decision to invest in Bitcoin.
In January last year, the company spent US$1.5 billion (AUD$2.11 billion) on Bitcoin.
Tesla, founded by billionaire engineer Elon Musk, also briefly accepted Bitcoin as payment for its electric cars, but quickly backtracked over concerns about the environmental impact of cryptocurrency mining.
“During the fiscal year ended December 31, 2021, we recorded approximately $101 million in impairment losses resulting from changes in the carrying value of our bitcoin,” Tesla’s statement said.
This comes after a horrific end to the year and a horrific start to 2022 for Bitcoin holders.
Bitcoin hit an all-time high of nearly US$69,000 (AUD$96,000), but a few weeks later had lost more than half that value to sit on a 2022 low of $33,000 in January.
Since then, BTC has recovered a bit and now sits at a price of US$43,000 (A$60,000).
At the same time as Bitcoin’s all-time high, the cryptocurrency’s combined market capitalization peaked at US$3 trillion. Today it has lost a third of that number, amounting to US$2 trillion just three months later.
Mr. Musk is a strong believer in cryptocurrency and has been hailed as the “King of Crypto” and “Father Doge” in the past after putting his weight behind some blockchains.
Despite the financial loss, Mr. Musk still believes in the benefits of investing in Bitcoin, the report revealed.
“We believe in the long-term potential of digital assets both as an investment and also as a liquid alternative to cash.”
And Tesla still managed to make some profit from its Bitcoin risk.
They sold Bitcoin in March 2021, before the cryptocurrency crashed, with a gain of US$128 million.
It’s a small blow for Tesla, which posted record gains last year.
The electric vehicle company has increased its profits sixfold in 2021.
Tesla made a huge profit of US$5.5 billion in 2021, up from US$721 million the previous year.
Its sales increased by 71% in one year, from $31.5 billion to $53.8 billion.
The last quarter of last year was particularly strong, with revenue of $17.72 billion in the last three months of 2021, up considerably from $10.74 billion in the same period. in 2020.
It is only the third year in a row that Tesla has made a profit after its founding 19 years ago.
CEO Elon Musk said 2021 had been a “revolutionary year” and he believed Tesla had finally become a “real business”.