Elon Musk’s Brother: ‘When My Brother and I Invested in Bitcoin, We Were very ignorant’
Kimbal Musk, Elon Musk’s brother, claims that the electric car maker was initially “completely unaware” of Bitcoin’s environmental risks when it incorporated the cryptocurrency into its balance sheet.
As you may recall, Tesla filed an annual report with the United States Securities and Exchange Commission (SEC) on Form 10-K for the fiscal year ended December 31, 2020 on 8 February 2021. According to this claim, Tesla has invested $1.5 billion on Bitcoin.
The annual report’s pertinent portion reads as follows: “We own and may acquire digital assets that are susceptible to market volatility, impairment, and other specific risks of loss.
“In January 2021, we modified our investment strategy to provide us more flexibility in diversifying our portfolio and optimising returns on cash that is not necessary to maintain acceptable operational liquidity. As part of the policy, which was unanimously adopted by our Board of Directors’ Audit Committee, we may invest a portion of such cash in alternative reserve assets such as digital assets, gold bullion, gold exchange-traded funds, and other assets as stated in the future. Following that, we invested a total of $1.50 billion in bitcoin under this policy and may continue to buy and retain digital assets on a short- or long-term basis. Additionally, we anticipate accepting bitcoin as payment for our goods in the near future, subject to relevant regulations and initially on a limited basis that we may or may not liquidate upon receipt.
“The values of digital assets have historically been and may continue to be very volatile, in part because to the many risks and uncertainties connected with them. For instance, the popularity of such assets is a relatively new development, and their long-term acceptance by investors, consumers, and enterprises is uncertain. Additionally, their absence of a physical form, their dependence on technology for creation, existence, and transactional validation, and their decentralisation may jeopardise their integrity against hostile assaults and technical obsolescence. Finally, the degree to which securities laws or other restrictions apply to or may apply to such assets in the future is unknown and subject to change. If we own digital assets and their values fall below our purchase prices, our financial situation may suffer.
“Moreover, digital assets are currently classified as indefinite-lived intangible assets under applicable accounting rules, which means that any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition will require us to recognise impairment charges, whereas we may make no upward adjustments for market price increases until a sale, which may have a negative impact on our operating results in any period in which such impairment occurs.” Furthermore, there is no certainty that future GAAP revisions will not compel us to alter the way we account for our digital assets.
“Finally, as intangible assets without centralised issuers or governing bodies, digital assets have been and may continue to be vulnerable to security breaches, cyberattacks, and other malicious activities, as well as human error or computer malfunctions that could result in the loss or destruction of private keys required to access such assets. While we intend to take all reasonable steps to secure our digital assets, if such threats materialise or the measures or controls we create or implement to secure our digital assets fail, this could result in the misappropriation or loss of all or a portion of our digital assets, resulting in a deterioration of our financial condition and operating results.”
Kimbal, a Tesla board member, was questioned at ETHDenver 2022 (February 17-20, 2022) whether the environmental issues around Bitcoin may eventually drive more businesses to invest in Ethereum rather than Bitcoin.
He responded: “We were quite inexperienced when we bought in Bitcoin. We had no idea the environmental effect would be so severe. We truly had no idea, correct?
“This seems to be an excellent repository of value. It’s an excellent approach to simply diversify your holdings, and it didn’t take long to acquire… I am not joking… Probably a million notifications informing us of our environmental degradation. And, of course, our firm is dedicated to fostering a sustainable energy future.
“So, we were very ill-informed when we made that judgement. We don’t regret it necessarily, but we are relieved that things are heading in a more ecologically responsible manner.”
Along with his place on the Tesla board, Kimbal serves on the SpaceX board and has ventured into non-profits, notably Big Green, a non-governmental school-based food growing programme in Colorado.