Stablecoin Cryptocurrency Company in SPAC Merger

7/9/2021

Tech

0 min read



	Image Credit: Bruce Detorres (Flickr)

SPAC Places “Hard Circle” Around Stablecoin Company

SPACs are not long-term investments; their very nature ensures that within 24 months, you are likely to be a shareholder in an operating company or be cashed out. Cryptocurrencies have demonstrated themselves to be volatile. Committing assets to the currency suggests faith that the investor believes that their Crypto will be among the few widely accepted over time. The leading stablecoin crypto provider, USD Coin (USDC), has agreed to go public through a merger with the SPAC Concord Acquisition Corp. in a deal valued at $4.5 billion. This could provide investors in the crypto space with a strong player to consider and also demonstrates that successful SPAC acquisitions continue through 2021.

The
deal values Circle at $4.5 billion. The agreement follows Circle having raised $440 million from investors including Fidelity, Valor Capital Group, and the London-based hedge fund Marshall Wace for operating expenses back in May. The company will become a publicly traded firm on the NYSE under the ticker symbol CRCL.

Stablecoins are a cryptocurrency that pegs its exchange value against an accepted fiat currency, gold, or other traditional assets. A benefit to a stablecoin, unlike Bitcoin, which in early May was trading above $58,000 and now recently valued at around $33,000, is a stablecoin is only as volatile as the underlying method of exchange it is referenced against. This means 1 USDC would still hold the same exchange value a week or month in the future, unlike other cryptocurrencies that have values that are much more speculative and erratic.

“Circle was founded with a mission to transform the global economic system through the power of digital currencies and the open internet,” said Jeremy Allaire, Circle’s co-founder, and CEO. He added that going public would give Circle “the capital and relationships needed to build a global-scale internet financial services company that can help businesses everywhere to connect into a more open, inclusive and effective global economic system.” There is more than $25 billion of Circle’s stablecoin USDC in cyber-circulation; it has helped conduct over $785 billion in on-chain transactions, according to the company.

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Deal Terms

The merged entity will be supported by $415 million in capital commitments at $10 per share, with investments from Marshall Wace, Fidelity Management & Research Company LLC, and Adage Capital Management LP. Additionally, there will be $276 million held by Concord, raised through an Initial Public Offering in December 2020. In total, the deal will add about $691 million of new proceeds to the new corporate structure. Proceeds from the deal will be invested in growth and product development.

Existing Circle shareholders will retain roughly 86% of the shares in the public company.

Take-Away

Exposure to cryptocurrency growth can come in various ways beyond holding the currency. Publicly traded companies that either provide digital currency direct or ancillary services such as blockchain are another way investors gain exposure.

The pace of de-SPACs, although off from the record levels of six months ago, is still brisk. The Circle transaction may cause more attention to be placed on stablecoin cryptos, which are less speculative, and increase familiarity with SPAC IPOs which have more options to reduce investor risk than most speculative plays in the stock markets.

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