Bitcoin Burdens Balance Sheets of Tesla, Block, MicroStrategy and More

Depressed bitcoin markets are weighing heavily on balance sheets for some of the world’s largest public companies.

Electric car giant Tesla, led by dogecoin bull Elon Musk, is currently down almost 45% on its bitcoin buys (if it didn’t sell any after its first quarter disclosure).

Tesla overall has acquired 43,200 BTC for $1.5 billion, according to Bitcoin Treasuries data. Musk’s company stash is now worth under $844 million — representing nearly $655 million in paper losses. Tesla’s balance sheet featured $17.55 billion in cash and equivalents as of March 31.

The company bought its BTC throughout the first quarter of 2021, when the top digital asset was on way to $60,000 for the first time. Tesla snapped up its BTC for $34,722 on average. Its share price is down 35% in the year to date.

For scale, the tech-heavy NASDAQ 100, which prominently features Tesla, has sunk 29% this year. The broader S&P 500 has shed 20% over the same period. Bitcoin has bombed almost 60%, from $47,700 to $20,000 as of 3 pm ET.

Meanwhile, Jack Dorsey’s payments provider Block (formerly Square) is in the red about 30% on its bitcoin. Block bought 8,027 BTC for $220 million in total; it’s now worth $157 million, converting to $63 million in unrealized losses. Block’s balance sheet housed more than $5.3 billion in cash on hand per its latest disclosure.

Block, which on average paid $27,407, started buying bitcoin in October 2020, when it published its stoic Bitcoin Investment Whitepaper. The firm’s flagship offering Cash App supports bitcoin, although Block generates little profit from those transactions. 

“Given the rapid evolution of cryptocurrency and unprecedented uncertainty from a macroeconomic and currency regime perspective, we believe now is the right time for us to expand our largely USD-denominated balance sheet and make a meaningful investment in bitcoin,” wrote Block at the time. Block’s share price has tanked 60% this year.

MicroStrategy, the third-largest listed stock with a bitcoin balance sheet, is down 36% on its BTC. Michael Saylor’s data intelligence company, which drew analyst criticism for doubling down last week, boasts the largest BTC treasury of any public company by far — three times Tesla’s haul.

Saylor spent close to $4 billion on 129,698 BTC for MicroStrategy, having raised a huge portion of those funds by selling corporate bonds. On average, the company spent $30,655 per BTC. MicroStrategy stock has collapsed 70% so far this year. It reported less than $93 million in cash and equivalents at the end of March.

MicroStrategy also took out a $205 million bitcoin-backed loan from crypto-focused bank Silvergate in March, when BTC was worth about $40,000. A drop below $21,000 technically puts it in proximity of a margin call, warned MicroStrategy chief financial officer Phong Le in May conference call.

Altogether, Tesla, Block, and MicroStrategy are down $2.16 billion on their bitcoin investments to date.

Strong earnings outside crypto means gains for Japanese game maker

Another prominent bitcoin treasury belongs to Chinese photo app publisher Meitu, which is incorporated in the Cayman Islands. 

The Hong Kong-listed company unexpectedly spent $49.5 million on bitcoin between March and April 2021, just in time for Beijing’s sweeping rulings on cryptocurrencies, including restrictions on Proof of Work mining on which BTC relies.

Meitu’s BTC is now worth only $18.4 million, down 63% after acquiring 941 BTC for an average price of $52,604.

The firm also bought 31,000 ETH for a total of $50.5 million, averaging out to $1,630 per token. Its ether stash is currently valued at $34.4 million, representing 32% depreciation. 

Meitu, which maintains $522 million in market value, hasn’t sold any of its cryptocurrency, according to its most recent filings. It posted up to $52 million worth of losses as a result. Meitu’s share price is down 33% this year.

Japanese mobile game maker NEXON and Norwegian crypto unit Seetee (a subsidiary of industrial investment firm Aker) are also down considerably on their bitcoin, having lost 66% and 63% respectively for paper losses worth $102 million, per Bitcoin Treasuries data.

Seetee parent Aker’s share price is down less than 15% in 2022, although crypto makes up a small part of its total investments via its subsidiary.

NEXON is bucking the trend entirely. The Tokyo-listed stock is actually up 21% so far this year, propelled by strong earnings in the first quarter.

Shorting bitcoin stocks could be riskier moving forward

Indeed, maintaining crypto exposure on balance sheets has been dicey this year. Short sellers have circled MicroStrategy and Coinbase, as well as a raft of bitcoin mining stocks such as Marathon and Riot Blockchain.

The latest short interest data (which tracks how many outstanding company shares have been shorted) was published on June 15, with no updates until next Tuesday. Still, the most recent data showed Coinbase short interest has risen 15% since May 31; Marathon’s had surged 21%.

MicroStrategy — the firm with the biggest bitcoin treasury — saw its short interest jump nearly 7% over the same period, with more than 43% of the float shorted, according to figures provided by data startup quantX. 

“Shorting MicroStrategy will become risky at some point,” said quantX founder Oisin Maher, who noted that shorting crypto stocks is already dangerous, as time to cover (the amount of days required to unwind short positions) seems to have picked up significantly. 

On the other hand, Block short interest actually fell, to 8% of the float. Tesla’s short interest also appeared unaffected, hovering around 3%.

Still, Maher relayed that bond markets for Coinbase and Marathon were looking extremely shaky. “General sentiment towards crypto is unclear, but sentiment towards certain institutions is clearly still very bad. Bond data does not lie,” Maher said.

This article was updated at 6:53 pm ET to correct denomination of Tesla’s bitcoin in third paragraph.

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