PLBY Group, the parent company of Playboy, announced that it recorded an impairment loss of $ 4.9 million on the Ethereum it held last year. The decline in the broader market prices during the crypto winter caused a significant impact. The lifestyle and media company accepted Ethereum as payments for its “Rabbitars” non-fungible tokens (NFTs) launched in 2021, which it holds in its balance sheet as digital assets.
Acceptance of Ethereum as Payment for NFTs
The NFTs were launched during the peak of the crypto market. Despite the decline in Ethereum value since October 2021, the company holds the NFTs in its balance sheet as digital assets, and their value is $ 327,000 as of last year. A previous filing shows that the company’s digital assets were worth $1.75 million as of Sept. 30 of last year.
Impairment Loss on Digital Assets
The company accounts for its digital assets as “indefinite-lived intangible assets” and takes impairment losses if the fair value of the assets falls below their carrying value at any time. According to the filing, the market price of one Ethereum in the principal market ranged from $964 – $3,813 during the year ended December 31, 2022, but the carrying value of each Ethereum 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. Therefore, negative swings in the market price of Ethereum could have a material impact on the company’s earnings and carrying value.
Impact on the Company’s Earnings
The impairment losses that the company takes on the digital assets can’t be recovered, even if the fair value of the assets rise after taking the impairment losses. Only when the Ethereum held in the balance sheet are sold at a gain, will the company’s earnings be impacted positively.
Playboy’s Foray into Digital Assets
The “Rabbitar” NFT project and “Liquid Summer” NFT drop are not the first foray of Playboy into the world of digital assets. In 2018, Playboy TV began accepting bitcoin payments, which expanded to Playboy.com in June. Earlier in 2021, Playboy entered into NFT and blockchain technology industry with its NFT drop called “Liquid Summer,” which is a collection of digital artworks created in collaboration with the artist Slimesunday. The collection, which was minted in May 2021, features archival photographs of Playboy model Lenna Sjööblom, the so-called “First Lady of the Internet.”
Conclusion
PLBY Group’s impairment loss of $4.9 million on Ethereum holdings is a result of the decline in the broader market prices during the crypto winter. Despite this, the company still holds the NFTs in its balance sheet as digital assets. The company’s earnings will only be positively impacted when the Ethereum held in the balance sheet are sold at a gain. Playboy’s foray into digital assets started in 2018 when Playboy TV began accepting bitcoin payments, which then expanded to Playboy.com in June. Playboy’s latest NFT drop called “Liquid Summer” is a collection of digital artworks created in collaboration with the artist Slimesunday.
