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With Temasek investing in web3’s Animoca, are institutions ready for a rodeo ride?

animoca brands

Today Bloomberg reported that Singapore’s state-owned investment firm Temasek will lead a $100 million funding round for Animoca Brands at a $6 billion valuation, which neither organization has confirmed. (Update: Temasek co-led a confirmed $110m round). Animoca focuses on NFTs, gaming and the metaverse and has invested in more than 340 projects, making it the most active web3 investor. The Australian securities regulator also recently sanctioned it for failing to publish accounts.

In January, the company raised $358 million in funding at a $6 billion valuation, including from George Soros. It follows multiple funding rounds in 2021 that totaled $216 million. Previous big-name investors have included Ubisoft, Samsung and RIT Capital Partners (Rothschild Investment Trust).

However, more mainstream large investors have held back, and Bloomberg reported that KKR dropped out of a potential investment.

That changed last Friday when Japan’s largest bank, MUFG, confirmed it made a strategic investment in Animoca’s Japanese subsidiary.

There’s no question that Animoca stands out for its vision, creativity, deal making and execution. It launched the second-ranked web3 metaverse, The Sandbox, and was an early investor in Dapper Labs, Sky Mavis (Axie Infinity) and Decentraland. 

But with the rate at which it’s moving, one can only speculate about the potential for creative chaos.

Animoca and the story of its books

One would think the lack of audited accounts would be a concern for institutions. Animoca, which operates out of Hong Kong, was previously delisted from the Australian Securities Exchange in March 2020 for breaching listing rules. Animoca stated it was because of its cryptocurrency involvement. 

However, when a qualified accountant reviewed comments by the ASX at the time of Animoca’s earlier suspension, the stock exchange’s concerns seemed warranted. They are related to the accounting treatment of token issuances.

In June this year, the securities regulator ASIC fined Animoca A$50,000 for failing to publish accounts as a public company. It eventually published statements for the year ending 2019 in July 2022 after removing Grant Thornton as the auditor and replacing it with DFK Collins. While the new auditor may be associated with DFK International, only six staff members are listed on Linkedin and the firm didn’t respond to requests about the number of qualified staff it employs.

According to those 2019 accounts, visionary leader Yat Siu doesn’t have a big stake in Animoca, just around 3.4% as of July 2022.

In June, the company provided a financial update for the period to the end of April 2022. Four months is a non-standard reporting period and is notable because the crypto crash was in early May. Hence, presumably everything was valued at pre-May crypto crash figures. Revenues for the first four months were an impressive $573 million. It valued its portfolio of 340 investments at $1.5 billion and claimed it holds $4.2 billion in tokens for its own projects, which are not reflected on the balance sheet.

Staff headcount grew from 177 at the end of 2019 to over 700 less than 18 months later.

Animoca is likely to continue to make a massive mark on the web3 space. But with the pace at which it’s moving and question marks around financial reporting, the question is whether institutions are up for a rodeo ride.

Image Copyright: Composite Ledger Insights