Thanks, Tesla. Corporate America Grapples With Balance Sheet Bitcoin

Thanks, Tesla. Corporate America Grapples With Balance Sheet Bitcoin

“You’re going to see every company in America do the same thing,” Mike Novogratz told Bloomberg earlier this week, while speculating wildly about the future of Bitcoin on corporate balance sheets.

His comments came after Tesla’s disclosure that it bought $1.5 billion in Bitcoin, which is now apparently part of “cash and equivalents” despite sporting volatility that is anything but cash-like.

Novogratz is, of course, squarely in the “more cowbell” camp (if you will) when it comes to cryptocurrencies. He’s made himself somewhat synonymous with the space.

“It doesn’t have to be a lot,” he conceded. “It’s the messaging that matters.”

He’s right about that, at least. It is the messaging that matters, not so much the amount. But one company which isn’t going to be sending any such “message” anytime soon is General Motors.

“We don’t have any plans to invest in Bitcoin — full-stop,” Mary Barra said, when quizzed on GM’s call by Morgan Stanley’s Adam Jonas. “We’ll monitor and we’ll evaluate,” she added. “If there’s strong customer demand for it in the future, there’s nothing that precludes us from doing that.”

Actually there is — something that “precludes” them, I mean. Not legally, yet. But logistically.

Tesla itself documented some of the accounting pitfalls (although it didn’t call them “pitfalls”) in its 10-K, but the real problem is volatility, something JPMorgan’s Nikolaos Panigirtzoglou pointed out this week.

“The main issue with the idea that mainstream corporate treasurers will follow the example of Tesla is the volatility of Bitcoin,” JPMorgan said.

If annualized volatility on corporate treasury portfolios is around 1%, converting the mix to 1% Flubber (and the youngest of the young investors won’t get that reference, but they can Google it) would raise the volatility to somewhere in the neighborhood of 8%.

With the caveat that I’ve never managed a corporate treasury portfolio, I can’t imagine that’s desirable. Especially without a solid rationale for the move. While I (sort of) understand the case for a company like Apple, which has the potential to actually get into the business itself, as outlined in an entertaining (if nothing else) note penned by RBC this week, putting Bitcoin on the balance sheet for the sake of it should remain a non-starter for blue chip companies.

Asked about this situation by CNBC Wednesday, Twitter CFO Ned Segal initially linked it to compensation, before elaborating a bit. “We’ve done a lot of the upfront thinking to consider how we might pay employees should they ask to be paid in Bitcoin, how we might pay a vendor if they asked to be paid in Bitcoin, and whether we need to have Bitcoin on our balance sheet,” he said.

 

“It’s something we want to study and continue to look at over time but we haven’t made any changes yet,” Segal added.

When pressed on what the “tipping point” would be beyond which Twitter might make such a move, Segal simply said that “one of the key things would be if people are asking to transact with us in Bitcoin.”

The implication is that not enough people are making that request just yet. So, I suppose “we’ll see what happens,” as a man who’s currently being tried in absentia in the Senate was fond of putting it.

Meanwhile, Elon Musk on Wednesday said he “bought some Dogecoin.” Lindsay Lohan tweeted “bitcoin to the moon.”


 

One thought on “Thanks, Tesla. Corporate America Grapples With Balance Sheet Bitcoin

  1. Thinking about this issue just a bit it seems that if employees want to be paid in bitcoin that might be OK if salary is expressed solely in those terms. When BTC is down a company can buy spot and save money on salaries. Couple that with a reserve of coin bought in dips, that coin can be used to pay employees at their fixed rate with coins bought when the price was down. It might not take too long for employees to figure some of this out but as long as companies stick to the idea that employees who want to get bitcoin pay, will only get bitcoin salaries, that idea might be a boon for CFOs who learn how to manage properly. After all, paying in stock options offers some of the same opportunities for firms. The best managed firms have been winning in that game for years.

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