CFOs Hesitate to Invest in, Handle Bitcoin Due to Volatility
12 February 2021 - 3:46AM
Dow Jones News
By Nina Trentmann
Chief financial officers are watching closely after Tesla Inc.
this week disclosed a $1.5 billion investment in bitcoin and
Twitter Inc.'s Ned Segal mused publicly about potentially paying
employees or vendors using the cryptocurrency.
Many CFOs remain hesitant to follow suit. Some point to the
volatile price of bitcoin, which could have negative effects on
their balance sheets, and question whether the practical uses of
bitcoin are worth the risk. Companies' investing policies in some
cases prohibit them from holding digital assets.
The value of Bitcoin more than quadrupled in 2020 and rose
further this week following Tesla's disclosure. It was trading
$48,163 on Thursday, up over 6% from Wednesday, according to
Coinbase, a digital currency exchange.
CFOs said the swings in the price of bitcoin, which has seen
drastic rises and falls in recent years, make it difficult to
navigate, similar to holdings of foreign currencies experiencing
strong volatility. "One of the risks is that it introduces
something similar to currency volatility to the balance sheet and
the day-to-day operations of the business," said Matthew Ellis,
finance chief of Verizon Communications Inc.
The telecommunications company currently has no plans to enable
bitcoin for payments, Mr. Ellis said, adding that it would bring an
added level of complexity to the business.
R. Scott Herren, the finance chief of Cisco Systems Inc., said
customers aren't demanding to pay in bitcoin. "We looked at this
pretty hard when I was at Autodesk, as a way of accepting payment",
Mr. Herren said, referring to his time as CFO of the San Rafael,
Calif.-based software company. Autodesk Inc. in the end decided
against permitting bitcoin as a form of payment, mainly due to
volatility and risks around converting it into a regular currency,
Mr. Herren said.
Roxi Wen, the CFO of Mozilla Corp., said she is following
discussions around bitcoin, but doesn't consider it an asset worth
holding on the balance sheet. While Mozilla, the organization
behind the Firefox internet browser, might invest in early-stage
ventures related to bitcoin, it wouldn't allocate its corporate
cash to it. "I don't see us trying to ride the market and benefit
from bitcoin or any coin," Ms. Wen said.
Mr. Segal, Twitter's CFO, said Wednesday the company continues
to review potential uses of the digital currency. His Chief
Executive Jack Dorsey is a bitcoin advocate. Payment company Square
Inc., which Mr. Dorsey also leads, recently acquired about $50
million worth of bitcoin for its corporate treasury.
Finance chiefs face an accounting challenge when dealing with
bitcoin and other digital assets. Because they don't meet the
requirements for cash, inventory or financial assets under current
accounting standards, digital currencies have to be treated as
indefinite-lived intangible assets, similar to trademarks or
perpetual franchises. Companies have to test the value of these
assets for impairments, meaning that potential falls in bitcoin
could result in write-downs.
CFOs also have to make sure that they are permitted to invest in
bitcoins under their company's investment policy. Tesla on Monday
said its board had greenlighted amendments to its investment
policies, adding that it can also invest cash in gold bullion and
gold exchange-traded funds among other assets.
German software giant SAP SE, currently can't make similar
investments in bitcoin due to the company's investment policy,
which doesn't cover cryptocurrencies, according to a spokeswoman.
Still, the company said it would monitor future developments in
terms of bitcoin as a potential strategic investment option, a
spokeswoman said.
Online-dating company Match Group Inc. also might have to alter
its investment policy to be able to make such an investment,
according to Chief Operating Officer and CFO Gary Swidler.
"I am not sure we want to get into that level of speculative
currency with our balance sheets," Mr. Swidler said.
Debbie Clifford, CFO of SVMK Inc., the parent of online-survey
company SurveyMonkey, said speculative assets such as bitcoin are a
tough sell for small companies that are focused on growth, but may
appeal to larger, mature companies.
"I see those companies looking at new and interesting ways to
drive value for shareholders with the capital they have to work
with," she said. "We have discussed bitcoin but have not seriously
considered investing in it given our current capital
structure."
Kristin Broughton, Mark Maurer and Allison Prang contributed to
this article.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
February 11, 2021 11:31 ET (16:31 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
Cisco Systems (NASDAQ:CSCO)
Historical Stock Chart
From Apr 2024 to May 2024
Cisco Systems (NASDAQ:CSCO)
Historical Stock Chart
From May 2023 to May 2024