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Figure behind $250 million SPAC, eyes blockchain stock exchange

Stock market exchange finance

Yesterday the team behind mortgage blockchain startup Figure Technologies  filed an SEC listing for a special purpose acquisition company (SPAC) with plans to raise $250 million and merge with a suitable target firm. Called Figure Acquisition Corp I (FAC), the senior management are all top executives at Figure Technologies, to which FAC is “affiliated”. Real estate lending specialist Elliot Management is an investor in the new venture.

Separately, Ledger Insights learned that Figure Technologies is eyeing launching a blockchain-based stock exchange. More on that later.

Previously, Figure Technologies has raised more than $220 million and created the Provenance blockchain. The company has a consumer-facing website where it initiates mortgage-related and other loans with all the transactions logged on the Provenance blockchain. So far, it has more than $1.5 billion in funding lines and has used the blockchain to package up the mortgages as asset-backed securities.

The primary purpose behind Figure’s consumer-facing website was to generate more activity on the Provenance Blockchain. That could be a major motivation behind the SPAC as the filing states any target company should be capable of “value enhancement from Figure Technology” including its proprietary technology.

The Chairman of FAC and CEO of Figure, is Mike Cagney, who also founded SoFI. Asiff Hirji is the President of both FAC and Figure and before that was President and COO of Coinbase and Ameritrade.

The fast-moving company also recently applied for a banking charter, receiving quite a bit of opposition from both incumbents and state banking regulators. Opponents are concerned about the company potentially receiving a national banking charter without providing deposit insurance. The motivation behind Figure’s application is it wants to launch an app that targets financial services for the underbanked. But without a national charter, it has to apply for a massive number of additional state licenses.

Figure wants to launch a decentralized stock exchange

Meanwhile, Figure is also considering launching a stock exchange with trades transacted on its Provenance blockchain. 

The Gamestop stock price explosion triggered Robinhood to block some trades. A major cause was the added margin obligations for Robinhood because of two-day institutional stock settlement times. Figure President Asiff Hirji penned a hard-hitting op-ed in which he argued for the need to ditch two-day settlement. (We didn’t publish mainly because it didn’t meet our limited self-promotion guidelines).

We previously noted that the company has its Adnales solution that uses the Provenance blockchain to enable companies to keep track of who owns its stock, the cap table. Now Figure wants to evolve that into a decentralized stock exchange solution.

Here’s what Hirji said about it: “When companies issue stock on Adnales, stock certificates are native digital assets that live on blockchain (no more paper at the DTCC). It is very straightforward for a company to then use Marketplace on Provenance to run a secondary market for their equity.”

“Trades settle real-time, with no counterparty risk in a transparent and liquid manner thus transforming the cumbersome, opaque and illiquid private company secondary market. We believe as more companies use Adnales for secondary markets, institutional capital will follow. When these companies want to go public, why would they move from a liquid real-time settlement environment to the archaic two-day settlement process on the NYSE or the Nasdaq?”

But for now, we have to deal with what we have, and hence the SPAC is on the NYSE. 

There have been two other high profile blockchain SPACs. One was Bakkt and another was trade finance firm Triterras which has run into headwinds from the dreaded short sellers.