Circle is a force within the US regulated crypto services space and it's gearing up to go public, but does the company have attractive fundamentals?
As was announced Thursday crypto services firm Circle Internet Financial Inc. will be going public with a valuation of $4.5 Billion.
Founded in 2013 by Jeremy Allaire and Sean Neville, Circle issues and maintains a so-called stablecoin known as USD Coin [USDC], a type of cryptocurrency designed to maintain an equal value to the U.S. dollar, and provides related services.
While the success of Circle's stable coin is considerable and is worthy of mention it's not the businesses only focus.
That said their USD Coin continues to be the main point of discussion as stablecoins have been garnering headlines fairly consistently in recent years so it's what people have come to know of Circle Inc.
USDC Dominance
Amongst all stablecoins USDC is #2 in terms of total market capitalization, and currently #8 overall.
I wrote about the different stablecoins and their differences back in March with a post titled "Are All Stablecoins Made Equal?"
In the article I touched on the fact that while Tether has maintained it's dominance for some time now USDC actually has stronger fundamentals and is highly regulated and audited within the US.
- Every month, the US dollar reserves for USDC are attested to by top 5 accounting services firm, Grant Thornton LLP. We publish those reports so that you can be confident that USDC is always 100% redeemable for dollars.
Circle Inc Business Beyond Stablecoins
Circle Inc's primary business is not its stablecoin!
Turns out its Transaction and Treasury Services business is its bread and butter offering with clients that include the likes of Dapper Labs (Flow Blockchain & NBA Top Shots), Compound Labs, and FTX exchange.
Circle generates revenue through three businesses, transaction fee's from its USDC stablecoin, transaction and treasury services (TTS), and a crowdfunding platform called SeedInvest.
Circle Inc Revenue Generation:
- Transaction & Treasury Services - $65 Million
- USDC - $40 Million
- SeedInvest - $10 Million
The slide deck does not give prior-year results, but it estimates that Circle will generate $115 million in revenue in 2021, but end the year with a $76 million loss.-Yahoo
For more info check out this Circle investor presentation, lots of good info here.
Recent Merger Adds Additional Funding & Leadership
Circle has merged with Concord Acquisitions, ahead of going public later this year. Concord is a business designed to be merged, and to be honest I don't fully understand the purpose of these SPAC businesses.
From what I see the merger provides additional financial support for the newly merged company along with providing some additional leadership in the form of the Team behind Concord. Concord Acquisitions comes with a reported $276 million cash in trust, a sizable chunk of change, and also comes with other considerable financial backing.
Is Circle IPO a Buy or a Pass?
Lots to be excited about with this IPO, circle has a good reputation and has been working hard to build out it's modern crypto API payment services as well as operating what's arguably the most regulated stabecoin available.
That said the company is still not profitable (7 years in) with an expected loss in the area of $75 Million for the year 2021.
I guess a lot will depend on what the asking price is for it's shares. The overall crypto market has obviously cooled significantly in past months, but I have to imagine this IPO will be overpriced similar to how the Coinbase IPO was, with initial investors seemingly over paying.
Ciao for now,
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