Circle's SPAC filing details losses and gains from sales of Poloniex, OTC desk

Quick Take

  • Circle is going public via a SPAC deal.
  • Included in Thursday’s public filing were financial details from some of Circle’s headline-driving business unit sales from the past two years. 

On Thursday, crypto startup Circle went public with its previously reported plans to go public via a special-purpose acquisition company, or SPAC, valuing the company at more than $4 billion in the process. 

The publicly filed disclosures required as part of the deal provided a new window into the heart of Circle's operations, including the financial specifics of some of its past headline-driving deals.

Among those big figures: a $156 million loss on the sale of crypto exchange Poloniex, which it acquired in early 2018 and sold in November 2019. The sale was characterized in the filing as "a strategic effort to better align our business with the products we offer to our customers." 

As part of that deal, Circle received $33.15 million in cash and "contingent consideration" worth $15 million. As noted in the doc:

"Contingent consideration was comprised of future deferred payments of $15.0 million subject to a successful operational transfer and indemnity holdbacks. During 2020, we received $10.0 million of the total $15.0 million and expect to receive future payments on the following schedule; $2.0 million in May 2021, $1.0 million in November 2021, $1.0 million in May 2022 and $1.0 million in November 2024. The remaining deferred payments are recorded as divestment consideration receivable as the Company is confident of receipt based on the progress of the operational transfer subsequent to closing the sale. The net assets sold to the buyer had a book value of $204.9 million and included goodwill of $185.5 million, other intangibles of $19.4 million and cryptocurrency of $1.7 million. This resulted in a loss on disposal of $156.8 million which is reflected in the accompanying Consolidated Statements of Operations."

Circle's filing also made note of two previously reported corporate sales, both of which netted modest gains for the firm.

These include Circle Trade, the firm's long-running trading desk, which it sold to crypto exchange Kraken in December 2019. Per the filing, Circle was paid $1.9 million in cash. Also part of the deal: "Pursuant to the agreement, the Company can receive up to 252,017 and 100,807 shares of the Buyer at a contractual price of $19.84 per share if certain earnout and retention conditions, respectively, are satisfied within one year of the closing date. Additionally, the Company is entitled to receive referral payments from the Buyer based on 0.1% of gross OTC volume from new clients for the first year."

Finally, the document included the financial details of Circle's sales of its retail-focused Circle Invest unit to Voyager Digital. Per the doc, Circle was paid $100,000 in cash and approximately $525,000 worth of Voyager Digital Shares. 

"In connection with the transaction the Company agreed to continue to operate the Circle Invest platform on behalf of prospective Voyager customers while Voyager acquires the appropriate licenses in three US states: New York, Alaska and North Carolina," Circle's filings noted.

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