Circle Scraps SPAC Deal After Getting SEC Cold Shoulder

Circle Internet Financial and Concord Acquisition Group boards decided to end a Special Purpose Acquisition agreement that would have seen Circle become a publicly-traded company.

Both companies ended the arrangement after being given the cold shoulder by the U.S. Securities and Exchange Commission regarding an S-4 registration statement filed earlier with the agency.

The SEC requires public companies to submit S-4 Forms as part of a merger, acquisition, or stock exchange offer. The form is designed to reduce fraud by disclosing share allocations and terms and any other information material to the merger.

Circle Still Determined to Go Public in Pursuit of Transparency

Circle planned to use the SPAC deal, originally announced in July 2021, to raise $715 million. It decided to delay the transaction in Feb. 2022 and raise more money from private investors amid the crypto market downturn, setting a deadline of Dec. 10, 2022, for a potential merger.

Under the amended terms, Concord also retained the right to extend the time frame to Jan. 31, 2022, by shareholder vote, should the SEC declare its S-4 filing effective. By Dec. 5, 2022, the SEC had yet to declare the filing effective, prompting both companies to call it quits.

“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 Circle CEO Jeremy Allaire.

According to Crunchbase, Circle raised $1.1 billion from eleven funding rounds, including a private equity round. This round came shortly after it entered into an amended agreement with Concord. Private equity investors in the stablecoin firm included asset management firms Fin Capital, Marshall Wace, Fidelity Management and Research Company, and BlackRock.

Circle CEO Says Stablecoins Play a Crucial Role in Crypto Future

Circle’s USDC stablecoin is, a type of cryptocurrency pegged to the value of the U.S. dollar. Yet it has been largely unaffected by the crypto contagion sparked by the collapse of the fifth-largest exchange, FTX.

Allaire volunteered the company’s financials in a tweet, revealing that it made $274 million in Q3 revenue, $43 million in net Q3 income, and has $400 million on its balance sheet.

He also thinks that the cryptocurrency industry will move beyond speculation into the utility phase. In this phase, stablecoins will have a crucial role.

Is a Public Listing the Way to Go?

Being a private company like fellow stablecoin issuer Tether, Circle is not required to disclose its financial results publicly. Should it pursue a public listing, however, it will need to file quarterly earnings reports with the SEC. It will also need to provide its shareholders with financial statements.

Circle believes that going public is part of the solution to restoring trust in the crypto industry. Stablecoin implosions and bankruptcy filings in 2022 have left consumer trust in the crypto industry in tatters.

Terraform Labs, the company behind the collapsed TerraUSD algorithmic stablecoin was a private company with headquarters in Singapore.

It maintained the peg of its stablecoin through a mix of trading incentives and algorithms rather than fixed assets like government-backed treasury instruments. Investors lost around $40 billion when TerraUSD collapsed to almost zero after the mechanism designed to keep it pegged to the U.S. dollar failed.

As investors rushed to redeem their stablecoins 1:1 for U.S. dollars, USDT, another stablecoin, briefly lost its peg to the U.S. dollar, prompting calls for greater transparency in the stablecoin industry.

Since then, several companies, including Circle, have committed to providing regular attestation reports to provide a window into the assets backing their stablecoins and restore users’ confidence. 

Additionally, Senator Pat Toomey of Pennsylvania proposed a stablecoin bill introducing transparent reporting requirements for stablecoin issuers. Congress has yet to pass the bill.

As the path to compliance still forms, stablecoin issuers and other crypto companies could alleviate consumer mistrust through public listings and ensure the survival of the crypto industry.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.