Circle Abandons IPO Plans

Circle, the issuer of the USDC stablecoin, has terminated its plan to merge with Concord Acquisition Corp, a publicly traded SPAC, by mutual consent.

The company had planned to go public in the fourth quarter through a SPAC deal. The deal was first unveiled in July 2021 and valued the Circle at $4.5B. However, in February 2022, the valuation was revised to $9B.

“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, Co-Founder and CEO of Circle.

Concord had until Dec. 10 to consummate the merger, with the option to seek an extension until Jan.31, 2023, via a shareholder vote. However, as those steps were not taken, the merger has lapsed. The boards of both companies have mutually agreed to the termination.

A SPAC (Special Purpose Acquisition Company) is a blank check company with no operations whose sole purpose is to raise capital via an IPO and later merge with an existing company. Usually, SPACs have to complete the merger within two years or return funds to investors in case they fail to do so.

According to its blog post, Circle’s third quarter saw total revenue of $274M, with net income coming in at $43M. Meanwhile, the company had nearly $400M in free cash.

Allaire said that the SEC’s process was “rigorous” and that such a process is necessary to bring greater transparency to the industry.

Circle and crypto exchange Coinbase are the founding members of the Center consortium, which launched in 2018. The consortium’s inaugural product was the fiat-backed USDC stablecoin. Currently, USDC is the second largest stablecoin behind Tether’s USDT, with a market capitalization of $42.68B.

FTX Impact

On Nov. 17, Circle disclosed that it had minimal exposure to FTX. Further, according to an S-4 filing with the U.S. Securities and Exchange Commission, the company suspended services to both FTX and Alameda Research as of Nov. 11.

The company had bought an 0.05% equity stake in FTX for $10M in early 2021.

Market Share

USDC has witnessed its market share erode by nearly $10B since August after Centre pre-emptively banned 38 addresses related to the Tornado Cash incident.

According to the latest data, net issuance of USDC has turned negative once again. Between Nov. 25 and Dec. 1, USDC holders redeemed tokens worth approximately $800M.