Bitcoin’s Q2 2021 price battering has experts speculating that Tesla may have to report a loss of around $100 million in the quarter. Analysts are convinced that reporting requirements may force Tesla to announce a paper-drawdown of $25 million to $100 million on its $1.5 billion Bitcoin bet.
With the BTC price recently plunging to revisit the levels last seen in January, CNBC business analyst Kate Rooney insisted on July 6 that Tesla may encounter an “impairment charge” needing it to report the loss in a disclosure to the United States Securities and Exchange Commission (SEC).
She noted that as Tesla first disclosed its $1.5 billion in BTC purchases in February, the onlookers and analysts think that the electric vehicle company may have gone underwater at the end of the quarter. Rooney said:
“Tesla holds crypto as an intangible asset and because of accounting rules, when Bitcoin’s value drops below a certain amount, companies have to mark that down in their financial statements. Tesla says if Bitcoin’s price falls below the carry cost, or where Tesla bought it, at any time after they bought it, an impairment cost is recognized.”
The analyst alleged that unnamed sources estimate that there is an impairment charge that may result in a loss of $25 million to $100 million for Tesla on paper. Nonetheless, Rooney said that Tesla cannot mark up the price of the bitcoin it holds until the position is realized in a sale.
Tesla CEO Elon Musk has turned into a highly polarizing figure in the cryptocurrency space in recent months. His company’s Bitcoin investment and support for bitcoin payments have helped ignite rallies into new all-time highs for the asset.
But, a cumulative of Tesla suspending Bitcoin payments over fears about the environmental impact of mining, and Elon Musk’s persistent Twitter-based Dogecoin proselytizing, the business entrepreneur has now fallen out of favor with most of the crypto community.
Some hours ago, a Reddit user “StablecoinsFraud” posted a screenshot of a tweet they purport Musk deleted after it pushed up BTC prices. They wrote:
“Elon Musk has deleted a post he posted last night that pumped the Bitcoin price. Someone in his ear?”