✒ Elon Musk is uniting two of the most popular investment themes under one roof. Appealing though it is, it is now even more risky to own the stock, which is one of the most speculative stocks of the current bull market.
According to Tesla’s SEC filing:
“In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash…”
“Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term.”
“Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future…”
Corporations holding bitcoin face accounting risk: bitcoin and other digital assets are considered indefinite-lived intangible assets (i.e. not currencies), a decrease in fair value below its carrying value (i.e. the amount the company paid for them) would lead to a recognition of impairment charge on the P&L even if it is temporary.
A point to note: under current US GAAP, the company may not make any upward revisions for any market price increase, until a sale.