PLBY Group (NASDAQ: PLBY) disclosed that it suffered a steep impairment loss of $4.9 million from the Ethereum (ETH) it had on its balance sheet.
The disclosure was contained in an annual report filed with the U.S. Securities and Exchange Commission (SEC) under the provisions of the Securities Exchange Act. According to the filing, PLBY Group and its subsidiaries recorded a consolidated net loss of $277.7 million and $77 million for the fiscal years 2022 and 2021.
PLBY Group, the parent company of Playboy, noted that $4.9 million in losses arose from digital currencies, particularly ETH. In 2021, the company dabbled into non-fungible tokens (NFTs) with the launch of its Rabbitars collection that racked up millions of dollars in profit.
PLBY Group accepted payments in ETH for its digital collectibles and included the digital currency on its balance sheet, noting that they were subject to impairment losses. Generally, impairment losses suffered by a company cannot be recovered even after a subsequent increase in the asset’s value.
“The market price of one Ethereum in our principal market ranged from $964 – $3,813 during the year ended December 31, 2022, but the carrying value of each Ethereum we held at the end of the reporting period reflects the lowest price of one Ethereum quoted on the active exchange at any time since its receipt,” read the filing.
The losses resulted from the extended bear market in the digital currency sector that reduced the global market capitalization from nearly $3 trillion to under $1 trillion. Assets like ETH and BTC tumbled from their all-time highs, losing over 60% of their values since October 2021.
“Therefore, negative swings in the market price of Ethereum could have a material impact on the company’s earnings and carrying value, while over time a rise in prices will impact the company’s earnings positively, is when the Ethereum held in the balance sheet, are sold at a gain,” the PLBY Group stated.
Trove of impairment losses
Impairment losses have become relatively commonplace in the digital currency sector over the last few months, with technology companies being the most affected. In 2022, Tesla recorded a staggering $170 million impairment loss from its BTC holdings despite selling $936 million worth of the digital currency.
MicroStrategy (NASDAQ: MSTR) also recorded similar figures in impairment losses, while Jack Dorsey’s Block (NASDAQ: SQ) reported $36 million in losses, according to its earnings report.
“The year-over-year decrease in BTC revenue and gross profit was driven primarily by a decline in consumer demand and the price of BTC, related in part to broader uncertainty around crypto assets, which more than offset the benefit of volatility in the price of BTC during the quarter,” the Block’s earning report read.
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