Stablecoin group Circle has ditched its plans to go public in a $9bn deal through a blank cheque company chaired by former Barclays chief executive Bob Diamond, showing how successive crises have sent a chill through the crypto sector.
The tie-up, which was initially forged during the crypto bull market in July 2021 and was expanded early this year, was seeking a valuation of $7.65bn and $9bn. Circle and Concord Acquisition, Diamond’s US-listed special purpose acquisition vehicle, said on Monday they had “mutually agreed” to end the merger.
The collapse of the Circle deal comes after the failure of digital asset exchange FTX in November sent shockwaves through the sector, knocking a crypto industry that was already under pressure from rising interest rates and a series of bankruptcies of big-name firms in the industry.
Concord had until December 10 to finalise the deal to buy Circle, something that would have taken the latter public on the New York Stock Exchange.
“We are disappointed the proposed transaction timed out, however, becoming a public company remains part of Circle’s core strategy to enhance trust and transparency, which has never been more important,” said Jeremy Allaire, Circle chief executive. Diamond added that he will “continue being an advocate for the company as it continues to grow”.
Circle’s USD Coin is the second-largest stablecoin on the crypto market, with a valuation of around $43bn, according to data from Circle, falling from more than $55bn in June 2022 after investors pulled out of the crypto market.
Stablecoins play a key role in connecting traditional and crypto markets, with most tracking the value of a major currency like the dollar. Crypto traders use them like cash between making bets. Stablecoin operators typically earn interest on the traditional assets that underlie their tokens, with a higher supply in circulation boosting revenue. The group said on Monday that it posted $43mn in net income in the third quarter of this year on revenue and interest income of $274mn.
Many publicly listed groups in the crypto industry have come under heavy pressure this year. US-listed exchange Coinbase’s shares tumbled around 80 per cent in 2022 while shares in Mike Novogratz’s Galaxy Digital investment group have fallen 81 per cent this year.
Broader market tumult has hit other key players in the crypto industry, including broker Genesis, which halted withdrawals from its lending scheme last month, and lending platform BlockFi, which followed FTX into bankruptcy.
Days after FTX went bankrupt, Circle said it had minimal exposure to FTX and sister trading firm Alameda Research. In early 2021, the company made a $10mn equity investment in FTX, and a $600,000 investment in FTX US.
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