Today Circle and Concord Acquisition Corp said the NYSE listing of Circle through a merger with the Concord SPAC has been abandoned. Circle is the issuer of the second largest stablecoin, USDC.
The two companies first agreed to merge in July 2021 in a deal valued at $4.5 billion. The transaction timeline was extended in February, doubling Circle’s valuation to $9 billion. The recent collapse of FTX and its impact on the cryptocurrency sector make it tricky for a merger to proceed at that valuation.
“Becoming a public company remains part of Circle’s core strategy to enhance trust and transparency, which has never been more important,” said Jeremy Allaire, co-founder and CEO of Circle.
Circle previously made relatively small investments in FTX and FTX.US.
The stablecoin issuer has plenty of cash. It said its own cash reserves (separate from USDC) were almost $400 million at the end of the third quarter. The company raised that amount in venture backing in April, including from BlackRock and Fidelity. BlackRock now manages a large proportion of the reserve assets that back the USDC stablecoin, which currently has a market capitalization of $44 billion.
While the latest crypto crash has not negatively impacted the USDC stablecoin itself, one of Circle’s products has. Circle Yield was a product operated in conjunction with Genesis Capital, allowing users to deposit USDC, which Genesis lent out. In forecasts earlier this year, Circle estimated it would have loans of $2.5 billion this year. However, when Genesis got into trouble in November, the balance was just $2.6 million, small enough for Circle to cover any customer losses potentially. Yield was seen as an important revenue opportunity.
However, in the meantime, interest rates have risen significantly, meaning that Circle is earning a decent return on the $44 billion USDC reserves. As a result, Circle turned profitable in the third quarter, earning $274 million in interest and $43 million in net income.