Circle's IPO is questioned: the valuation is almost halved, and the desperate monetisation attempt under the pressure of profits?

Author: Nancy, PANews

After years of unsuccessful IPO preparations, Circle, the issuer of stablecoin USDC, recently submitted an application to the SEC to be listed on the New York Stock Exchange. However, issues such as valuations nearly halved, high dependence on U.S. Treasuries for revenues, and high share losses have also raised questions about Circle's business prospects.

The valuation was almost halved, and the shares were sold to Coinbase in exchange for the full issuance rights of USDC

The day before the U.S. House of Representatives plans to amend and vote on the stablecoin regulatory bill GENIUSAct, SEC website documents show that Circle filed an S-1 file with the SEC to conduct an initial public offering under the ticker symbol "CRCL" and apply for listing on the New York Stock Exchange. Meanwhile, Circle has hired JPMorgan Chase and Citibank to help with its IPO, both of which were also members of the financial advisory team for Coinbase's IPO.

However, Circle does not disclose in detail the specific number of shares to be issued and the target price range in this prospectus. However, Circle's valuation has changed several times in response to market conditions and its size, from $4.5 billion in 2021 when the SPAC merger was traded, to $9 billion in 2022 when the merger agreement was amended, and then to about $5 billion in the secondary market in 2024. According to Forbes, Circle's target valuation in this traditional IPO plan is between $4 billion and $5 billion, which has shrunk by nearly half from its peak.

Circle had full control of the USDC issuance rights prior to the IPO. According to The Block, Circle acquired the remaining 50% stake in the Centre Consortium in 2023 for $210 million worth of shares, which was previously held by Coinbase. The Centre Consortium is a joint venture responsible for the issuance of the USDC stablecoin, which was jointly established by Coinbase and Circle in 2018.

"In August 2023, at the same time as entering into the cooperation agreement, we acquired the remaining 50% equity interest in Centre Consortium LLC from Coinbase," Circle disclosed in the "Material Transaction" section of the prospectus. "The consideration for the transaction was paid for approximately 8.4 million shares of Circle common stock, totalling $209.9 million at fair value. Upon completion of the acquisition, Centre became a wholly owned subsidiary of Circle and was dissolved in December 2023 and its net assets were transferred to another wholly owned subsidiary of Circle. Coinbase also disclosed that it acquired a Circle stake that was granted by agreement rather than a cash purchase. This also means that Circle will use the company's shares in exchange for full control of USDC, and the deal will not directly affect Circle's cash flow.

In fact, Circle began preparations for an IPO as early as 2021, reaching a merger agreement with SPAC firm Concord Acquisition to list through the SPAC route, but the deal was delayed due to lack of SEC approval and finally announced its termination at the end of 2022. In January 2024, Circle again revealed that it had filed an IPO application in secret and said it would do so after the SEC completed its review process.

Compared with previous attempts, the background of this application has changed significantly: now the stablecoin market has achieved a qualitative leap in size, the growth momentum is strong, and the influence of stablecoins, including USDC, in global finance is increasing; At the same time, the United States has a positive attitude towards compliant stablecoins, creating more development space for the development of the stablecoin track, including JPMorgan Chase, PayPal, Visa, Fidelity and Ripple and other giants are laying out stablecoins, and the Trump family project WLFI also plans to promote stablecoins. At the same time, crypto companies such as Kraken, eToro, Gemini, and CoreWeave are all looking to IPO amid the growing clarity of crypto regulatory policy in the United States.

However, Circle's IPO prospects are facing multiple doubts, and its core business model and profitability have sparked heated discussions in the market.