Reddit holds 'immaterial' amounts of bitcoin and ether on its books

Reddit filed forms Thursday to go public and it turns out the company behind the social media site has a small amount of cryptocurrencies on its balance sheets.

“We invested some of our excess cash reserves in Bitcoin BTC -0.07% and Ether and also acquired Ether and Matic as a form of payment for sales of certain virtual goods, which we may continue to do in the future,” the company said in its S-1 filing . “As of December 31, 2023, we did not hold digital assets other than Bitcoin and Ether for treasury purposes, and our investment policy requires approval by our board of directors for any investments in cryptocurrencies.”

With that said, Reddit noted on its financial statements, “The net carrying value of our cryptocurrencies, which consisted primarily of Bitcoin and Ether, as well as all related cryptocurrency activity, was immaterial for the periods presented.” In other words, it wasn’t enough to break out in the filing.

Perhaps with a wary eye to regulators, Reddit was careful with what cryptocurrencies it held on to. The filing noted that it limited its treasury holdings to bitcoin, ether, and “any other cryptocurrency” which regulators such as the Securities and Exchange Commission or the Commodities Futures Trading Commission will likely not view as a security.

Reddit's history with crypto

Reddit has pursued crypto-related projects in the past, most notably its series of Polygon-based NFTs which the company calls Collectible Avatars, shying away from the "NFT" term which has proven controversial to users of the site. At their peak of popularity , hundreds of thousands of collectibles were minted each day. 

Reddit also experimented with blockchain-based rewards called Community Points for several popular subreddits, including the /r/CryptoCurrency forum; however, the company sunset the program last October, citing problems with regulation and scalability. 

Reddit's IPO needs SEC approval

To go public, Reddit requires approval from the SEC and first filed its paperwork confidentially with the regulator in December 2021. The company, which is seeking to trade its shares on the New York Stock Exchange with the ticker RDDT, has yet to reveal the amount or price of the shares. A panoply of Wall Street’s largest institutions — Morgan Stanley, Goldman Sachs, JPMorgan, and Bank of America Securities — are leading the underwriting, along with Citigroup and Deutsche Bank among others getting in on the action.

Reddit noted that it acquires crypto “in exchange for goods and services.” On its balance sheet, it assesses its holdings quarterly “or more frequently” for impairments, which is then put on its income statement under general and administrative expenses. However, if the price of its holdings subsequently rises, the company noted in its filings, that won’t show up until the crypto is sold.

As is standard practice, Reddit added disclaimers on many of its business practices and outlooks, but it was noteworthy that the company had this sentence in its disclaimer on cryptocurrencies: “While we believe cryptocurrencies and blockchain technology have significant potential, the popularity and prevalence of cryptocurrencies is a relatively recent trend, and whether cryptocurrencies and blockchain technology will continue to be adopted by consumers and businesses in the long term is uncertain.”