Stablecoin issuer Circle Internet Financial abandoned plans to go public in a $9 billion special-purpose acquisition company, or SPAC, merger, underscoring how both the world of crypto and popularity of these deals have been slammed in this year’s market selloff.
Circle said Monday that it and
(ticker: CND) mutually had agreed to terminate their proposed combination, announced in the heat of the bull market in July 2021 and amended to double Circle’s valuation in February 2022 to $9 billion.
It dashes the immediate hopes of taking one of the biggest players in crypto public at a time when interest and confidence in digital assets have been severely eroded, with the painful bankruptcy of exchange FTX being the latest drag on the sector.
“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’s CEO and co-founder, in a statement.
SPAC deals, which take investors’ cash to bring a private company public via merger, boomed in 2020 and 2021. But issuances have fizzled out in 2022 as wider dealmaking and public offerings slowed. The Federal Reserve’s aggressive tightening of financial conditions this year in a bid to get inflation under control with higher interest rates has taken much of the hot air out of markets and contributed to a meltdown in crypto prices.
And a spectacular meltdown it has been. Investors who flocked to buy
and other digital assets amid a historic bull market largely have headed for the hills this year as interest has faded along with prices.
Bitcoin is changing hands at just a quarter of its November 2021 all-time high, with the total market capitalization of tokens crumbling to $850 trillion from nearly $3 trillion over the same period. Higher rates and falling stock prices have put pressure on digital assets, exacerbated by cracks in the crypto market and a string of industry failures.
SPAC deals must be completed within a set timeframe, which includes clearance from the Securities and Exchange Commission, the regulatory body that has proved itself to be largely tough on crypto. The deadline for the Circle-Concord tie-up was Dec. 10. Barron’s warned in July that a number of crypto SPACs, including Circle’s, appeared to be in jeopardy of completing their deals on time.
Circle said it became profitable in the third quarter of 2022 with net income of $43 million on total revenue of $274 million. Circle issues USD Coin (USDC), which is a U.S. dollar-pegged stablecoin that is the fifth-largest cryptocurrency by market capitalization. Stablecoins like USDC and its larger peer Tether play a key role in digital asset markets, acting as an on-ramp for traders between cash and crypto and providing most of the liquidity that underpins trading.
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