Written by: Gyro Finance
The United States is heavily promoting stablecoins, with various parties strongly gathering, but the pioneer is still Circle.
On June 5th Eastern Time, following Coinbase, the most market-watched IPO is approaching. Circle will officially become the first stablecoin enterprise listed on the New York Stock Exchange, drawing a perfect end to its 7-year IPO marathon.
According to the latest data, Circle completed its IPO on the New York Stock Exchange at $31 per share, exceeding the original expected price range ($24-26), raising $1.1 billion, with the stock code "CRCL". Due to surging demand, the originally planned 24 million shares were expanded to over 34 million shares.
The capital market's optimism is self-evident, and for the industry, Circle's listing is far more than just selling stocks.
Although Circle is well-known in the crypto circle, it might still seem distant to those outside the circle. Founded in 2013 and headquartered in Boston, Circle was originally an American consumer finance startup, initially providing storage and national currency exchange services for Bitcoin. As the market changed, its business repeatedly transformed, from crypto wallets to exchanges, ultimately focusing on its core product, USD Coin (USDC). As a homegrown US dollar stablecoin, USDC has relatively more compliance restrictions and is more favored by domestic users compared to the globally prominent USDT. In the stablecoin field, it has consistently ranked second, with USDC's current circulation around $61 billion, occupying 27% of the market share, second only to the market leader USDT.
From its development path, Circle can be considered a capital darling born with a golden key. As early as 2013, it was favored by General Catalyst, raising $9 million in Series A funding, setting a record for crypto companies at the time. Subsequently, it attracted major capitals like Goldman Sachs, IDG, and DCG, and even Chinese capital once appeared, with Baidu Ventures, China Everbright Group, CICC Jiazi, and Yixin all participating in its D-round financing. Of course, due to well-known regulatory reasons, Circle's Chinese business entity Tianjin Shike Technology Co., Ltd. was simply deregistered in 2020. Interestingly, after Circle's IPO news was released, China Everbright Group's stock price rose 44% in 5 days, a tear of the times left by Circle in China.
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Despite luxurious capital protection, Circle's listing path was not smooth. In 2018, after completing Series E financing with a valuation of $3 billion, Circle already had preliminary IPO ideas, planning to stand out with "compliance + listing + transparency". However, before the hype could last a year, the unexpected market crash in 2019 saw Circle's valuation plummet from $3 billion to $750 million, shattering its IPO dream for the first time.
In 2021, Circle revisited the listing path, and to avoid compliance verification, it planned to go public through SPAC Concord Acquisition Corp, with a valuation of $4.5 billion. However, the SEC intervened, announcing an investigation into USDC's securities attributes, causing Circle's IPO to collapse again.
Three years later, in January 2024, Circle secretly submitted its IPO after learning from various lessons, to reduce inquiries and comments from regulatory agencies and external media. On April 2nd, Circle submitted its S-1 filing to the SEC, officially launching its IPO process, planning to list on the New York Stock Exchange. Interestingly, in early May, Bloomberg reported that Ripple proposed to acquire Circle but was rejected due to a low offer. Shortly after, The Block also reported that Circle was actively seeking buyers from Coinbase and Ripple, with a valuation of at least $5 billion. Due to continuous sale rumors, the market speculated that Circle was pursuing both IPO and sale, aiming to leverage the situation for the highest bidder.
On May 27th, Circle denied the sale rumors. On the same day, Circle officially submitted its listing application to the New York Stock Exchange. According to the disclosed prospectus, Circle would issue 24 million Class A shares, with 9.6 million issued by the company and 14.4 million from existing shareholders, with an expected price range of $24 to $26 per share, to be led by JPMorgan Chase and Citigroup.
On June 5th, Circle will officially enter the New York Stock Exchange, completing its trading debut. From the latest disclosed data, Circle received 25 times oversubscription, ultimately increasing share issuance from 32 million to 34 million shares. The per-share price is estimated at $31, not only higher than the $27-28 expected range but also a significant leap from the initial $24-26 range. Based on this price, Circle's total valuation reaches $6.2 billion, and with potential dilution factors like employee stock plans, restricted stock units (RSUs), and warrants, the fully diluted valuation will be around $7.2 billion. Although this is significantly lower than the $9 billion envisioned in 2022, from the market perspective, in the crypto field with valuations of tens of billions of dollars, Circle's valuation still appears relatively healthy, even in the current relatively tight liquidity environment.
The prospectus data also supports this point. As mentioned earlier, Circle's USDC issuance is around $60 billion, compared to USDT's $150 billion, though still a significant gap, it clearly dominates over the third-place stablecoin with less than $10 billion. With the continuous advancement of the US stablecoin bill, there is still long-term growth potential in this field.
However, from a business model perspective, Circle has obvious hidden risks. In terms of revenue, Circle's total revenue in 2024 was $1.676 billion, growing about 16% year-on-year, with approximately 99.1% of income from USDC reserve asset interest, reaching $1.661 billion, with other income at $15.169 million. It's clear that risk-free interest spread is actually Circle's core income source, but this is based on the macro context of tight, high-interest rates. If subsequent rate cuts begin, its income will be affected, in other words, Circle is strongly correlated with systemic cycles, thus potentially exposed to systemic risk spillover.
On the other hand, despite revenue reaching $1.6 billion, Circle's net income is only $156 million, with $1.45 billion seemingly vanishing due to seemingly trivial issuance fees. Most people would think that on-chain large-scale token issuance costs approach zero, but while token issuance is zero-cost, issuance in the current ecosystem is a technical challenge, highly dependent on large exchanges' network effects. Breaking down its issuance costs, Coinbase is the largest partner, siphoning off $900 million of Circle's profits, accounting for 54.18% of Circle's annual revenue. Meanwhile, Circle's collaboration with Binance to allow USDC in Binance Launchpool involves a one-time payment of $60.25 million, with monthly incentives based on USDC custody balance for the next two years if Binance holds at least $1.5 billion in USDC. It's evident that in its profit structure, Circle has relatively weak bargaining power, with profits squeezed by exchanges and other partners.
However, valuation is subjective. Some argue that since 14.6% of Coinbase's revenue comes from USDC-related earnings, and with Coinbase's current market value of around $65 billion, Circle's valuation should be at least over $10 billion. In fact, Circle itself had similar thoughts, with previous rumors suggesting an intended offer of $9-11 billion when negotiating with Coinbase and Ripple, but both parties clearly rejected this.
Overall, Circle's valuation is reasonable, and in this context, institutions have been eager to extend their olive branches. According to a document from the U.S. Securities and Exchange Commission, Cathie Wood's ARK Investment Management has expressed interest in purchasing up to $150 million worth of stocks. On the other hand, asset management giant BlackRock plans to acquire approximately 10% of the IPO shares. It's worth noting that the two had already reached a cooperation in March this year, with Circle entrusting at least 90% of its USD custody reserves (excluding bank deposits) to BlackRock, and BlackRock's return is a commitment not to issue its own stablecoin. This move is actually very wise, not only gaining strong support from traditional institutions and facilitating future sales channels, but also cleverly avoiding potential competition from traditional asset management businesses with their own traffic.
On the other hand, Circle's determination to go public has raised market doubts about potential cash-outs, believing this move is only to allow large capital players to exit smoothly, benefiting Wall Street capital rather than truly benefiting retail holders. Currently, this view seems somewhat thin. First, as early as 2018, Circle's valuation had reached $3 billion, and the subsequent $440 million financing in 2021 was based on a $4.5 billion valuation. It can be considered that most investors' entry valuations were already relatively high, so the current total valuation of $7.2 billion is not an astronomical return for long-term early investors. Second, unlike Coinbase's direct listing, Circle has adopted a conventional IPO method, meaning early investors and insiders cannot sell their shares within the first 180 days, at least not allowing retail investors to provide exit liquidity in the short term. Based on pre-listing speculation, with an already oversubscribed offering, most industry professionals believe Circle will perform quite well.
Regardless of its performance, this is another milestone event for Circle and the industry. For Circle, going public not only resolves funding pressure but also officially enters the capital arena, creating core drivers for future operations and development, further achieving global expansion, and successfully securing an ecological position in the long-foreseeable U.S. stablecoin landscape, gaining cyclical benefits ahead of others.
For the industry, the impact is even more far-reaching. What appears to be a stablecoin company's listing is actually a concentrated embodiment of the U.S. priority strategy. Among all stablecoin issuers, Circle's compliance is most prominent, as evidenced by its previously obtained New York BitLicense. By this standard, after this listing, USDC is expected to become the first stablecoin meeting U.S. stablecoin bill requirements and further become a hard-pegged sample between fiat and stablecoins, thereby constructing a compliant stablecoin circulation mechanism. In this context, compliant stablecoins will officially interface with the banking and Wall Street system, with USD stablecoins becoming the core carrier connecting the global crypto realm. This is precisely the U.S. government's intention in promoting the stablecoin bill, with the U.S. dollar serving as an anchor traversing traditional and crypto financial systems, once again reshaping U.S. dollar hegemony globally. In the long term, as stablecoins continue to develop, cross-border payments may potentially bypass bank account systems and achieve clearing through stablecoins, potentially impacting the existing global clearing system.
Additionally, some analysts believe Circle's listing will stimulate the DeFi market. With Circle's valuation increase, businesses or projects closely related to stablecoins may also hope to see growth. In other words, Circle might become a valuation anchor in the DeFi field.
Theoretical significance is a subjective product, but the market's attitude is fundamental. Whether it truly has value or is a capital cash-out, Circle's trajectory on its first day of listing will tell everything.
