Reddit filed a form to go public on Thursday, revealing that the company behind the social media site holds a small amount of cryptocurrency on its balance sheet.
“We invested some of our excess cash reserves. Bitcoin BTC
-0.37%
And we have acquired Ether and we have acquired Ether and Matic as a means of payment for the sale of certain virtual goods and will continue to do so in the future,” the company said. From the S-1 filing. “As of December 31, 2023, we did not hold any digital assets other than Bitcoin and Ethereum for treasury purposes, and our investment policy requires board approval for investments in cryptocurrencies.”
In response, Reddit noted in its financial statements that “our net holdings in cryptocurrencies, consisting primarily of Bitcoin and Ethereum and all related cryptocurrency activities, were immaterial for the periods presented.” In other words, it wasn’t enough to explode in the filing.
Perhaps wary of regulators, Reddit has been cautious about the cryptocurrencies it holds. The filing states that it has limited its Treasury holdings to Bitcoin, Ethereum and “other cryptocurrencies” that would likely not be considered securities by regulators such as the Securities and Exchange Commission or the Commodity Futures Trading Commission.
Reddit’s Cryptocurrency History
Reddit has pursued crypto-related projects in the past, most notably a series of Polygon-based NFTs that the company calls Collectible Avatars, while avoiding the term “NFT”, which has proven controversial with the site’s users. At the height of its popularity, hundreds of thousands of collectibles were issued daily.
Reddit has also experimented with blockchain-based rewards called Community Points for several popular subreddits, including the /r/CryptoCurrency forum. But the company discontinued the program last October, citing regulatory and scalability issues.
Reddit’s IPO requires SEC approval
Reddit needs SEC approval to list and first filed a confidential filing with the regulator in December 2021. The company, which plans to trade its stock called RDDT on the New York Stock Exchange, has not yet disclosed the amount. Or the price of a stock. Some of Wall Street’s biggest institutions, including Morgan Stanley, Goldman Sachs, JPMorgan and Bank of America Securities, are leading the acquisition, with Citigroup and Deutsche Bank also joining in.
Reddit noted that it acquires cryptocurrency “in exchange for goods and services.” The balance sheet evaluates holdings for impairment quarterly “or more frequently” and then lists them as general and administrative expenses on the income statement. However, if the price of the holdings subsequently rises, it will not appear until the cryptocurrency is sold, as the company noted in the filing.
As is standard practice, Reddit has added disclaimers to many of its business practices and outlook, but it is notable that the company has included the following sentence in its disclaimer for cryptocurrency: Cryptocurrencies are a relatively recent trend, and it is unclear whether cryptocurrencies and blockchain technology will continue to be adopted by consumers and businesses in the long term.”
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