Circle, Boston’s biggest crypto startup, cancels deal to go public
Nonetheless, business is booming
Circle Internet Financial, Boston’s leading crypto technology startup, said Monday that it has called off its plan to go public soon amid near-crisis conditions in the digital currency markets.
Following the implosion of crypto exchange FTX last month, digital currency prices have tumbled and thrown the entire ecosystem into chaos. While Circle’s digital currency, known as the US Dollar Coin or USDC, has not been hit, stock market investors were unlikely to embrace the startup given all of the turmoil.
Circle said it ran out of time to complete the deal, which had a Dec. 10 deadline, while it was still trying to answer questions from the Securities and Exchange Commission. The startup still hopes to go public at some point, according to cofounder and chief executive Jeremy Allaire.
“We’ve made a huge amount of progress towards being a public company and we are very committed to becoming a public company,” Allaire said in an interview Monday.
With increased scrutiny on the crypto market after FTX’s collapse, getting SEC approval right now would be difficult, said James Wester, director of cryptocurrency at Javelin Strategy & Research. “The SEC had to review and approve the prospectus,” Wester said. “That hasn’t happened yet, and given what is happening in crypto at the moment, it doesn’t seem likely to happen any time soon.”
Despite canceling the deal, Circle’s business appears to be booming. Third-quarter revenue hit $274 million, more than 10 times the total from the same pe
‘We’re in a very strong position financially .... That’s noteworthy, especially in a market where you’ve got companies that are going bankrupt .... ’
JEREMY ALLAIRE, cofounder and chief executive, Circle Internet Financial
riod a year ago, and the company said it turned a profit for the first time, with net income of $43 million.
Part of the growth came from increased use of USDC, but higher interest rates may have been even more important. Circle holds $43 billion in cash and US Treasury securities to back the $43 billion of outstanding USDC in circulation and collects the interest on the assets. The yield on the 90-day Treasury bill, for example, jumped to more than 4.2 percent last week from 0.05 percent a year earlier.
Unlike many other tech startups, Circle did not have to cut staff or other expenses to reach profitability, Allaire said. The company currently employs 910 people, up from 120 two years ago; 84 are in the Boston area.
“We’re in a very strong position financially, we’ve had rapid growth, and we’re investing and building,” he said. “That’s noteworthy, especially in a market where you’ve got companies that are going bankrupt and companies that are losing a lot of money.”
Circle’s original plan, announced in the summer of 2021, was to raise $715 million by merging with a special purpose acquisition corporation called Concord Acquisition Corp. But in February, amid a meltdown in the prices of SPAC deals, Circle said it would raise more money from private investors and delay completing the SPAC merger until later in 2022.
The cancellation comes as Congress looks to increase regulation of crypto markets in the wake of the FTX scandal. At a Senate hearing on Thursday, Rostin Behnam, chair of the Commodity Futures Trading Commission, told lawmakers they needed to move fast to close regulatory gaps that allowed FTX and others to lose billions of dollars of customer money.
The total amount of USDC has shrunk somewhat during the crypto market crisis. About $43 billion of USDC was outstanding as of Dec. 5, down from $54 billion at the end of July.
Circle’s chief has experienced rough markets in the past. He and his brother JJ Allaire founded a Web design company called Allaire Corp. in the 1990s and took it public just before the Internet bubble popped. Macromedia acquired the company in 2001 for a fraction of the value of Allaire’s IPO price.