Circle, the issuer of the USD Coin (USDC) stablecoin, has announced its plans to launch an Initial Public Offering (IPO). The company intends to sell its shares at a price range of $24 to $26 each, aiming to raise up to $624 million. In this IPO, Circle and other selling shareholders plan to offer 24 million shares, with the possibility of increasing the total to 27.6 million shares if the IPO’s underwriters fully exercise their option to purchase additional stock.
Circle previously announced plans to go public in 2021 via a merger but has now opted for a traditional IPO. The company reported a net income of $155.7 million last year, down from $267.5 million the previous year. Its revenues and reserve income for 2024 stood at $1.68 billion, compared to $1.45 billion in 2023.
In an updated IPO prospectus released on Tuesday, Circle announced that a significant portion of shares being sold during its initial public offering will come from existing stakeholders, including co-founders Jeremy Allaire and Sean Neville, rather than from the company itself. This announcement highlights a notable approach, reminiscent of a strategy used in 2012. Circle will sell 9.6 million shares in the offering, while existing shareholders will sell 14.4 million shares.
This structure, where 60% of the shares come from existing investors, is highly unusual in the tech sector. Circle’s decision not to provide specific reasons for this high percentage of insider sales has led to market speculation. The company is currently profitable, reporting $64.8 million in net income in the latest quarter and holding nearly $850 million in cash and equivalents.
Based on a projected share price range of $24 to $26, Circle stands to raise approximately $240 million from the IPO.
Circle’s IPO details unveiled
One potential explanation for the significant insider selling could be the poor returns for venture capital firms in recent years.
The market peak in 2021 followed by soaring inflation and rising interest rates has made investors cautious, leading many late-stage tech companies to delay IPOs or reduce valuations for private funding. The scarcity of exits has created a demand among private investors for liquidity. Circle’s leadership, including CEO Jeremy Allaire, who co-founded the company in 2013, and other key executives, are among those selling portions of their shares.
Allaire is selling about 8% of his stake, while Sean Neville and finance chief Jeremy Fox-Green are each set to sell around 11%. Major venture firms such as Accel, Breyer Capital, General Catalyst, IDG Capital, and Oak Investment Partners are slated to sell about 10% of their stock each. Despite the unusual structure, some analysts suggest this move could still indicate confidence in the company.
“The big guys are holding enough so they still have skin in the game, so that shouldn’t alarm investors,” said Lise Buyer, founder of IPO consultancy Class V Group. The IPO comes amidst a turbulent market for initial public offerings. Notably, eToro, a retail trading platform, recently priced its IPO above expectations, and Nvidia-backed cloud computing firm CoreWeave also went public, though with mixed results.
However, buy-now-pay-later platform Klarna postponed its IPO plans following significant market disruptions. Circle’s public offering is a significant step for the cryptocurrency and fintech industries, symbolizing growing interest and investment in stablecoins and digital financial services. The outcome of this IPO will be closely watched by market participants and investors alike.
