On Friday, judgment came through on the legal case between blockchain startup Symbiont and IPREO. Before the acquisition of IPREO by IHS Markit in 2018, IPREO and Symbiont set up a joint venture, Synaps, which aimed to use blockchain to transform the notoriously inefficient secondary market for syndicated loans.
IHS Markit has the dominant position in the sector with a 99% market share with its ClearPar solution. The judge found IHS Markit’s acquisition of IPREO breached a non-compete agreement signed between Symbiont and IPREO.
As damages, the joint venture Synaps was awarded the profits of IHS Markit’s ClearPar solution. Those amounted to $142 million after tax for the period starting on the IPREO acquisition date, 2 August 2018, to 30 September 2020. Damages were awarded through 30 November 2020, so the figure will be higher. However, the joint venture has some liabilities and needs to be dissolved, so Symbiont stands to gain roughly $70 million for its half share. Symbiont has raised $43 million in equity funding to date.
The timing of the IHS Markit acquisition of IPREO in 2018 was unfortunate for Synaps. The joint venture had signed investment term sheets with Citi, Credit Suisse, U.S. Bank and Deutsche Bank. When IHS Markit announced the acquisition in May 2018, BNP Paribas was about to sign a term sheet, but it withdrew. Citi followed in June. The first three banks had been willing to invest $17.7 million for a 38.8% stake in Synaps.
There were also allegations that when IHS Markit thought that Credit Suisse was ready to switch to the Synaps platform in April 2018, it offered a generous volume discount on ClearPar.
IHS Markit had discussions about buying Synaps, but it never reached an agreement in writing. The first approach came in August 2018, shortly after the IPREO acquisition was finalized. Symbiont’s CEO Mark Smith asked for $13 million for its equity stake plus a long term revenue share, but Markit didn’t follow up. It came back in January 2019 and offered Symbiont $5 million plus royalties. Symbiont asked for $15 million and there was a verbal agreement that was never converted to writing. In April 2019, IHS Markit poached Synaps CEO Joe Salerno with a rather lucrative offer and Symbiont filed its lawsuit the following month.
Meanwhile, Symbiont is very much not a one-trick pony with several other projects on the go. One that’s soon to launch is the joint venture with Lewis S Ranieri for mortgages that was first unveiled in April 2018. It has an index data solution that it developed for Vanguard, and an asset-backed securities project it piloted with BNY Mellon, Citi, and State Street. But there are several others.