LONDON – Circle Internet Financial, the issuer of the world’s second-largest crypto stablecoin, USDC, said its planned merger with special purpose acquisition company (Spac) Concord Acquisition has been scrapped.
Circle received in-principle approval in November from the Monetary Authority of Singapore to offer digital payment token products.
Termination of the deal with Concord underscores receding enthusiasm for both Spacs and cryptocurrencies as turbulent markets fuel a bearish sentiment for risky bets.
An amendment to the deal in February doubled Circle’s valuation to US$9 billion (S$12 billion), when Circle’s USDC stablecoin had a market circulation of about US$52 billion – a figure that has since dropped to around US$43.4 billion, according to pricing data from CoinGecko.
The collapse of Circle’s Spac deal comes after more than a year of falling crypto prices, which alongside several major hacks and company failures, have damaged the crypto industry’s reputation. The bankruptcy of crypto exchange FTX, which is being investigated by a number of United States authorities on allegations of potential mishandling of customer assets, has worsened that landscape.
Circle joins a growing list of private companies, ranging from Bitcoin miner Prime Blockchain to investing app Acorns Grow, that have had mergers fall apart. At least 56 Spac tie-ups have been called off in 2022, more than double the number in the five years prior, as the Spac industry and global markets have been rocked by volatility.
The stablecoin issuer is not likely to be the last Spac deal to crumble, with nearly 150 racing against deadlines to complete mergers amid market turmoil.
Circle chief executive Jeremy Allaire said becoming a public company “remains part of Circle’s core strategy”. The company became profitable in the most recent quarter, the statement said, with total revenue and reserve interest income of US$274 million and net income of US$43 million.
Circle raised an additional US$400 million in funding in April from traditional Wall Street names, including BlackRock, Fidelity Management and Research, and Marshall Wace.
Mr Bob Diamond, chairman of Concord and former chief executive of Barclays, said in a statement on Monday that he remained confident in blockchain’s ability to disrupt financial services, and of Circle’s future growth. He added that a “regulatory-first approach” to building trust between crypto and the financial sector “has never been more important”.
Spacs are known as blank cheques because they raise money in initial public offerings (IPOs) with the goal of taking an unidentified company public. They give themselves a short window, typically two years, to buy something or return the cash to investors. Management teams can get short extensions to find and close deals, but they usually have to get shareholder approval and pay them to do it.
The Spac ecosystem has been hammered by a broader rout in more speculative assets amid concerns about increased government oversight. The De-Spac Index is down 68 per cent in 2022 compared with a 15 per cent drop in the S&P 500 Index, as the companies that have gone public through blank-cheque firms struggle. More than one-third of about 400 firms that merged with a Spac are now trading below US$2 a share.
BLOOMBERG, REUTERS
