Good day everyone,

I hope you are all well and had an excellent week, welcome to CryptoGod-1’s blog on all things crypto. In this post I will be looking at how the stablecoin issuer Circle have once again filed for an initial public offering (IPO) with federal regulators, as the world’s second-largest stablecoin USDC does so with a confident approach.

Initial Public Offering

The first thing to note is what exactly an initial public offering (IPO) entails and how it works. An IPO refers to a process of offering shares of a private organisation to the public in which is a brand new stock issuance. It is the first time the company has a stock issuance to the public, and it allows the company to raise equity capital from public investors.

This sees the company changing from a private to a public company and is considered an important time for private investors to fully gains from their original investment. Generally an IPO includes a share premium for existing private investors, while also allowing public investors to participate in the offering. Some consider this an exit strategy for the companies original founders or investors, while others see it as a way to increase the money brought in by the company and its exposure.

The reason why an IPO is considered lucrative for a business is because it opens access to raising a lot of money. This will allow the company to grow and expand while also increasing their transparency and share listing credibility. This can be extremely beneficial when looking to borrow funds down the line. An IPO generally happens when a company reaches a point in its growth where it believes it is mature enough for the rigors of SEC regulations along with the benefits and responsibilities to public shareholders.

The shares of a company for an IPO are priced by underwriting due diligence, and when said company goes public the previously owned private share ownership converts to public ownership. The value of existing private shareholders’ shares become worth the public trading price. The number of shares a company sells and the price at which they sell for are the generating factors for the company’s new shareholders' equity value.

There are generally two key parts to an IPO, with the first being the pre-marketing phase of the offering, while the second is the initial public offering itself. The mains steps as part of an IPO are:

• Proposals.

The underwriters send in their proposals and valuations for their services, along with the best type of security to issue, offering price, amount of shares, and an estimated time frame for the market offering to commence.

• Underwriter.

The company choses its underwriter and formally agrees to underwrite terms through an underwriting agreement.

• Team.

The IPO team is formed and comprises the underwriter, lawyers, certified public accountants, and SEC experts.

• Documentation.

All information regarding the company is compiled for required IPO documentation. 

• Marketing and Updates.

All marketing materials are created for the pre-marketing of the new stock issuance. This involves underwriters and executives who market the share issuance to estimate demand and establish a final offering price. 

• Board and Processes.

A board of directors is formed to ensure processes for reporting auditable financial and accounting information each quarter.

• Shares Issued.

On the IPO date the company issues its shares.

• Post IPO.

Some provisions may be instituted following the IPO, while underwriters may have a specified time frame to buy an additional amount of shares after the IPO date.

Some of the advantages of an IPO is that a company gets access to investment from the entire investing public to raise capital. This makes it easier for acquisition deals (share conversions) and increases the company’s exposure, prestige, and public image. Along with that there is increased transparency, which comes with required quarterly reporting. This means a company can receive more favourable credit borrowing terms.

Some of the disadvantages of an IPO is that IPO's are expensive to enact. The cost of maintaining a public company is generally an ongoing one and usually unrelated to the other costs of doing business. The fact a company's share price can fluctuate is also a potential distraction for management, who may focus on stock performance over real financial results. The company is also required to disclose financial, accounting, tax, and other business information and may have to publicly reveal secrets and business methods that could help competitors.

Circle (USDC)

The company behind the USDC stablecoin, Circle Internet Financial, noted on Thursday the 11th of January 2024 that it had confidentially filed for a U.S. initial public offering as part of plans to become a publicly-traded company. They did not disclose the number of share of the proposed price range for its new IPO filing. The company is based in Boston and Circle control the issuance and governance of USDC, which is pegged to the U.S. dollar.

It is expected that the IPO will take place once the Securities and Exchange Commission completes its review process, and this will be subject to other conditions. Back in 2022 the company valued itself at $9 billion when it made an attempt to go public via a special-purpose acquisition company, however that deal ended in December 2022. The CEO of Circle, Jeremy Allaire, noted at the time that he was disappointed that in the end the transaction had 'timed-out' but he noted that it did not disillusion them in their aim of going public.

With USDC bring the second largest stablecoin behind Tether, and the seventh largest cryptocurrency of all by market capitalisation, the current supply of USDC tokens on the market is around $25 billion. This is down from the peak of $56 billion in mid-2022. This is because the company experienced a period of rapid growth in 2022 but with the crypto market entering a downturn investors became more cautious due to a variety of high-profie cryptocurrency firms collapsing, including FTX.

Back in July 2023 Circle announced it was making layoffs along with ending its investments in non-core business areas. With their move to become a publicly-traded company coming in the wake of the SEC approving the first stock market funds for bitcoin with the Bitcoin Spot ETF's, it is seen as a move somewhat necessary following high interest rates and market volatility. Their filing comes as bankers and executives are hoping that market conditions for newly listed businesses will improve after the difficulties of the previous two years. 

Back in March 2023 Circle saw its global market share fall sharply after it was revealed they had held roughly $3bn in the now-collapsed Silicon Valley Bank. At the time this admission caused the USDC stablecoin to depeg from the US dollar, trading as low as 88 cents. At the time of the banks collapse there had been $43 billion of USDC tokens in issue.

Circle are not the only company who have recently made a filing for an IPO, with outdoor clothing brand Arc’teryx owner Amer Sports, healthcare platform BrightSpring Health Services and casual dining chain Panera having also filed for potential listings. With the Federal Reserve expected to steadily cut interest rates this year it is seen as a move to mitigate any further potential downturns. In the wider cryptocurrency space, publicly traded crypto firms are few and far between, and stablecoins in particular have steered clear of becoming publicly traded companies. This moves could be the beginning for future stablecoin companies to move into the publicly traded realm of business.

Have a great day.

Peace. CryptoGod-1.

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