Bitcoin is weighing on the balance sheets of Tesla, Block, MicroStrategy and more

Bitcoin is weighing on the balance sheets of Tesla, Block, MicroStrategy and more

Depressed Bitcoin markets are weighing heavily on the balance sheets of some of the world's largest public companies.

Electric car giant Tesla, led by Dogecoin bull Elon Musk, is currently down nearly 45% in its Bitcoin purchases (if it sold none following its first-quarter disclosure).

According to Tesla, Tesla acquired a total of 43,200 BTC for $1.5 billion Bitcoin treasures Data. Musk's company assets are now worth less than $844 billion - which equates to nearly $655 million in paper losses. Tesla's balance sheet had $17.55 billion in cash and equivalents as of March 31.

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

In terms of magnitude, the tech-heavy NASDAQ 100, in which Tesla is prominently featured, is down 29% this year. The broader S&P 500 has lost 20% over the same period. Bitcoin bombed almost 60%.

Meanwhile, Jack Dorsey's payment provider Block (formerly Square) has about 30% of its Bitcoins in the red. Block bought 8,027 BTC for a total of $220 million; it is now worth $157 million, which translates into unrealized losses of $63 million. Block's balance sheet contained more than $5.3 billion in cash, according to its most recent disclosure.

Block, who paid an average of $27,407, began buying Bitcoin in October 2020, when it published his stoic Bitcoin investment whitepaper. The company's flagship product, Cash App, supports Bitcoin, although Block generates little profit from these transactions.

“Given the rapid development of cryptocurrency and unprecedented uncertainty from a macroeconomic and monetary policy 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,” Block wrote at the time. Block's share price has fallen 60% this year.

MicroStrategy, the third-largest publicly traded stock with a Bitcoin balance sheet, is down 36% against BTC. Michael Saylor's data intelligence company, which was criticized by analysts for doubling last week, has by far the largest BTC treasury of any publicly traded company - three times as much as Tesla.

Saylor spent nearly $4 billion for 129,698 BTC on MicroStrategy after raising a large portion of those funds through corporate bond sales. On average, the company spent $30,655 per BTC. MicroStrategy shares are down 70% so far this year. At the end of March, the company reported less than $93 million in cash and cash equivalents.

MicroStrategy also raised $205 million with Bitcoin backing loan from crypto-focused bank Silvergate in March, when BTC was worth about $40,000. A fall below $21,000 technically puts it close to a margin call, warned MicroStrategy Chief Financial Officer Phong Le on a conference call in May.

In total, Tesla, Block and MicroStrategy have lost $2.16 billion on their Bitcoin investments to date.

Strong non-crypto revenue means profits for the Japanese game maker

Another prominent Bitcoin treasury belongs to Chinese photography 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 decisions on cryptocurrencies, including restrictions on the proof-of-work mining that BTC relies on.

Meitus BTC is now worth just $18.4 million, down 63% after acquiring 941 BTC at an average price of $52,604.

The company also purchased 31,000 ETH for a total of $50.5 million, averaging $1,630 per token. Its Ether supply is currently valued at $34.4 million, a depreciation of 32%.

Meitu, which holds a market value of $522 million, has not sold any of its cryptocurrencies, according to its most recent filings. It Sent up to $52 million in losses as a result. Meitu's share price has fallen 33% this year.

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

Seetee's parent company, Aker, is down less than 15% in 2022, despite crypto making up a small portion of its overall investments.

NEXON is completely bucking the trend. The Tokyo-listed stock is actually up 21% so far this year, driven by strong performance Merits in the first quarter.

Shorting Bitcoin stocks could be riskier in the future

In fact, maintaining crypto exposure on balance sheets has been difficult this year. Short sellers have circled MicroStrategy and Coinbase, as well as a number of Bitcoin mining stocks such as Marathon and Riot Blockchain.

The latest short interest data (which tracks how many outstanding company shares have been sold short) was released on June 15, with no updates until next Tuesday. Nevertheless, recent data showed that Coinbase's short interest has increased by 15 percentage points since May 31; Marathons had increased to 21.

MicroStrategy – the company with the largest Bitcoin treasury – saw short interest rise nearly 7 percentage points over the same period, with more than 43% of the float sold short, according to figures from data startup quantX.

“Shorting MicroStrategy becomes risky at some point,” said quantX founder Oisin Maher, who noted that shorting crypto stocks is already dangerous as the time to cover (the number of days required to complete short sales at a profit) appears to have increased significantly.

On the other hand, block short interest actually fell by 4.5 percentage points to 8% of the float. Tesla's short interest also appeared unaffected, hovering around 3%.

Still, Maher shared that the bond markets for Coinbase and Marathon looked extremely shaky. "General sentiment toward crypto is unclear, but sentiment toward specific institutions is clearly still very poor. Bond data doesn't lie," Maher said.

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