Crypto companies trying to go public are getting a cold shoulder from the SEC
Cryptocompanies that aim to go public through a special purpose acquisition company, or SPAC, may run out of time to terminate the agreements.
SPACs, known as blank-check companies, mainly take investors’ cash and then look for a buyout target that can be announced through the company’s packaging. SPAC issues increased in 2020 and 2021 with 861 SPACs as issued shares. This year, however, only 70 SPACs have gone public. And several high-profile ones have failed to find a buyout target – including Bill Ackman’s Pershing Square Tontine Holdings (ticker: PSTH).
The SPAC crash is now taking a toll on crypto companies. Barrons has identified more than a dozen crypto companies that have attempted to merge with a SPAC, but appear to be stuck on the sidelines.
One of the most prominent names is Circle Internet Financial, which supports the “stablecoin” USD coin. Circle has tried to go public with a SPAC called
Concord Acquisition
(CND) since July 8, 2021. The transaction valued Circle at $ 9 billion, according to a February 16 regulatory listing. The Securities and Exchange Commission has until December 10, 2022 to approve the agreement, although the deadline may be extended.
“We appreciate that the SEC is thorough in navigating fairly new businesses that want the trust, openness, and accountability that come with being a public company,” a Circle spokeswoman said in an email to Barrons.
On the sidelines is also a crypto / SPAC agreement between eToro Group, an Israel-based online brokerage house, and
FinTech Acquisition Corp. V
(FTCV), a SPAC backed by veteran financier Betsy Cohen. The companies stopped the merger in early July after they could not complete the transaction by the June 30 deadline.
Failure to obtain approval from the SEC was one of the reasons why the agreement broke down, said a person familiar with the situation. “[eToro] just ran out of time, “the person said.
eToro declined to comment. FinTech Acquisition Corp. V did not return requests for comments.
Many other crypto / SPAC agreements have not crossed the finish line. They include the crypto exchanges Apifiny Asset Network and Coincheck; the crypto-mining companies Bitdeer Technologies Holding, Griid Infrastructure, Finfront Holding (Bitfufu) and Prime Blockchain; online broker TradeStation Group; and Infinite Assets, a platform for trading non-fungible tokens, or NFTs.
Also in limbo, the crypto exchange Bullish, together with Nukkleus, is a crypto-financial services company. Bullish tries to team up
Far Peak Acquisition
(FPAC) mens
Nucleus
(NUKK) seeks an agreement with
Brilliant acquisition
(BRLI). Nukkleus is currently trading over the counter and plans to list on the Nasdaq stock exchange when it merges with SPAC.
Bullish did not return any requests for comments. Nukkleus’ merger with Brilliant Acquisition is expected to end in August, a spokesman said.
Only one crypto company, the blockchain payment company Roxe Holding, is seeking to merge with a SPAC that was listed in 2022.
“For many SPAC sponsors, the clock is ticking for them to find an acquisition target before they are required to return investors’ money,” said Professor Eric Talley of Columbia Law School, which specializes in corporate and transaction law.
Each SPAC agreement has a deadline to complete, but SPACs can extend the deadlines pending shareholder approval, according to Evan Ratner, president of Levin Capital Strategies, a New York money management firm that has invested in SPACs. “Usually it’s three months in exchange for a small increase in trust value,” Ratner said, referring to the amount investors can redeem from SPAC.
Investors are usually entitled to a refund of $ 10 per share under certain conditions – if a SPAC fails to find an acquisition target, close a merger or fail to win approval from the SEC.
Reviews of crypto / SPAC agreements sometimes take six months or more – far longer than it usually takes the SEC to sign non-SPAC merger transactions, Ratner said. “Crypto is a new room, and I expect reviews to be longer due to the new and complicated nature of this room,” he said.
“It’s fair to say that it has become more challenging to complete a crypto SPAC merger today than it was a year ago,” said Dan Kahan, a partner in the law firm King & Spalding, which handles crypto business.
SPACs have been at the SEC’s crossroads since 2020, and the regulator has tried to strengthen the enforcement of the crypto sector. In addition, there are still many questions regarding crypto-regulation, jurisdiction – SEC or CFTC – and the accounting process for digital assets, Kahan said.
A spokeswoman for the SEC declined to comment.
An advantage of the delays is that some SPACs appear to be stuck below the $ 10 withdrawal value. This value is like a floor or “safety net for investors,” Talley said. If investors do not expect a deal to go through, they can withdraw money for a small profit.
Some blank check companies that trade just under $ 10 include: Fintech Acquisition Corp V, which terminated its agreement with eToro; Far Peak Acquisition Corp., which is trying to merge with Bullish; Circles Merger Partner, Concord Acquisition; and Quantum FinTech Acquisition (QFTA), which is trying to combine with TradeStation.
Write to Luisa Beltran at [email protected]
