Why Crypto Firms Are Considering IPO – From Former Goldman Sachs Investor
The crypto industry is jumping into IPO action, leading with Coinbase while others like Circle and Bitdeer are looking to SPACs, or special purpose acquisition companies, as another avenue to become public.
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IPOs are on a tear this year with more than two thousand offerings, raising a total of $ 453 billion. Part of the increase in interest was due to a number of high tech IPOs, such as Robinhood, Udemy, Squarespace, and more.
The crypto industry is jumping into action. Coinbase, one of the best-known and most valuable crypto companies, debuted on the Nasdaq earlier this year, marking a milestone for the industry. Likewise, crypto companies like Circle and Bitdeer are looking to SPACs, or special purpose acquisition companies, as another way to go public.
According to a recent report from BeInCrypto, a number of crypto companies are considering an IPO in the near future. The list of companies includes Kraken, a leading crypto exchange, and BlockFi, a crypto wealth management company.
In this article, we spoke with Gavin Qu, Vice President of Operations at PrimeBlock, about why crypto companies are considering an IPO.
How does a financial analyst like you find yourself in the Bitcoin mining industry?
It’s a bit of a story. My fields of study and internship experiences including investment banking and equity research focused on economics and finance during my university studies. After graduating in economics and statistics from the University of California at Berkeley, I joined the securities division of Goldman Sachs Asia. As a global equity seller, I have been able to explore, research and invest in individual stocks in US markets with a focus on SaaS, Internet and EV, semiconductors and emerging technologies. Driven by my keen interest in corporate finance, investing, portfolio management, etc., I was self-taught and passed all three CFA exams throughout my university studies and my first few years on the job.
Looking at the American Internet / SaaS businesses that have grown from the late 20th century to the present day, I was surprised at the strength of the exponential growth in adoption translating into successful business models and businesses. . I strongly believe in the potential of blockchain as the ‘Internet of the next era’ and want to be a part of it.
There has been a huge trend for financial professionals to switch to Crypto Mining as well as other parts of the Crypto ecosystem. The industry is changing rapidly and creating many opportunities for people with different areas of expertise. Specifically for crypto mining, there are many transferable skills available to finance professionals.
Why are crypto firms considering an IPO?
The short answer: because it’s an effective way to raise stable capital and position yourself for continued access to public capital markets.
IPOs are a great way for companies to raise funds, and the crypto industry is no different. A number of companies are considering an IPO because they want to take advantage of current market conditions and raise more capital in a public, transparent and sustainable manner.
Traditionally, crypto companies have relied on token sales and venture capital to raise funds. An IPO can be a more effective way to raise significant capital, which is used to expand operations and attract more clients, while also building the equity value of the business.
By going public, a crypto firm can offer shares of the company to potential investors, giving them a stake in the company and a chance to create value if the company is doing well.
Besides money, why are crypto companies going public?
Another reason is to attract talent. One of the main challenges for crypto companies is to attract talent. The best engineers and developers are often recruited by big tech companies, such as Google, Facebook, and Amazon.
An IPO can help change that. By going public, a crypto company can offer employees stock rewards linked to liquid and publicly traded stocks, which can be a major draw for top talent. Public companies also tend to have better benefits and pay than private companies. This can make them more competitive in the race to attract top talent.
The IPO can also increase your credit rating. The credit rating of a crypto business can be a major obstacle to success. Many companies in the space have been shunned by traditional lenders because they see the crypto industry as too risky.
By going public, a crypto company can show that it is a transparent and sustainable business with a solid financial foundation and regular, transparent and regulated public disclosure and internal controls. This can help improve the credit rating of the business and make it easier to obtain debt financing in the future.
Additionally, an IPO can help increase the visibility of a crypto business and reach a much wider audience, including institutional investors and the general public.
Consider the publicity achieved by the Coinbase IPO. The company managed to raise more than $ 500 million and its share price jumped up to 60% on the first day of listing. This exposure can be a major boon for a crypto business, as it can help attract new customers, business partners, and investors.
What is the impact of market conditions on these decisions?
An IPO can help a crypto business weather a market downturn. When cryptocurrency prices drop, it can be difficult for a crypto business to stay afloat without a range of funding options.
Essentially, an IPO can provide a cushion for a crypto company in the event of a downturn. A SOE can better maintain operations during tough times and possibly rebound when the market recovers.
Why is a compliant path to raising capital important?
A token sale does not usually exchange the equity of the business for money. Depending on how it is structured, it may or may not comply with securities laws and other regulatory requirements, especially given the uncertain and evolving regulatory landscape regarding digital assets in the United States and beyond. . A compliant public securities offering can help legitimize a crypto business and show that it is complying with rules and regulations.
Going public means conducting your capital raising – then living like a public company, with regular and transparent reporting and other compliance obligations – in accordance with the rules and regulations of the Securities and Exchange Commission (SEC).
Let’s recap – what are the main reasons crypto companies go public, and what does the future look like for crypto IPOs?
Overall, there are a number of reasons why a crypto company might choose to go public. An IPO can provide a business with much-needed capital, attract top talent, improve its credit rating, ensure credibility as a regulated public entity, and increase transparency and visibility. It can also help a business weather a market downturn by giving it access to broader financing options.
The crypto industry is growing rapidly. As the industry matures, we can expect to see more companies going public through a traditional regulated stock IPO (while, of course, stimulating technological and regulatory innovation on the market. how capital formation, trading and record keeping will look like in the future with the age-old transition to a native digital architecture). While this comes with additional transactional and ongoing costs and friction, it is a clear positive for the crypto industry as it can help legitimize the space and attract more investors, business partners. in traditional and talent sectors. It will be fascinating to see how the industry evolves in the years to come.
About the Author:
Gavin Qu is the Vice President of Operations at PrimeBlock, a provider of digital asset extraction and infrastructure. Gavin previously held a global equity sales role in the Securities division of Goldman Sachs, leading the Asia Equities sales force on US and EU IPOs across various industries. Gavin brings years of experience in investment banking, global equities, and project management to the founding team at PrimeBlock.
Photo by Patrick Weissenberger on Unsplash