Known as the issuer of USDC stablecoin, Circle has been around since 2013. The company started out as a bitcoin payment platform but soon moved to digital currency payments. It uses blockchain, the technology behind bitcoin and other cryptos, to facilitate payments for businesses. It also has a platform called SeedInvest for startups to raise capital.
Now the company is planning to go public through a SPAC (special purpose acquisition company) with Concord Acquisition Corp. And it hopes to become a financially chartered national bank, which could put it in a unique position to link blockchain with traditional finance.
TL;DR
- Circle was founded in 2013 by Jeremy Allaire and Sean Neville.
- Its best known for its stablecoin USDC, which is the ninth-largest crypto with a market capitalization of $26 billion.
- The company has applied to become a nationally chartered bank as it anticipates a boom in stablecoins like USDC.
- The deal values Circle at $4.5 million and it expects to raise $1.1 billion in capital.
- Circle has yet to make a profit. It incurred net losses of $17.3 million and $19 million in 2020 and 2019 and a loss of $2.6 million in the three months ending March 31, 2021.
- The SPAC merger is expected to close by the end of 2021.
- The new Irish holding company will trade on the New York Stock Exchange under the symbol CRCL.
A quick company history of Circle
Circle was started by Jeremy Allaire and Sean Neville in 2013 to make it easier for businesses to accept bitcoin and other cryptocurrencies. Its since expanded to become a payments processing company. It helps businesses process payments globally using both traditional methods and blockchain.
The company was started on the belief that blockchain and digital currency will change the global economic system, effectively making it more open, inclusive, efficient and integrated.
In 2018 Circle created its own stablecoin, called USDC. Stablecoins are cryptos that are usually pegged to another commodity, asset, or fiat currency. In this case, USDC is pegged to the U.S. dollar. The coins reserves are published on a monthly basis by Grant Thornton, which attests that the company has assets matching the number of USDC in circulation. In March 2021, Visa said it would let USDC be used to settle transactions on its payments network.
That same year, Circle acquired crypto exchange Poloniex for $400 million in an attempt to become a one stop shop for cryptos. In 2020, less than two years later, it spun out Poloniex in a broader restructuring. However, Circle is still dealing with legal issues related to Poloniex that have cost the company $156 million, according to a regulatory filing published to support its IPO SPAC.
In 2018 Circle also acquired SeedInvest, a platform that helps startups raise funds. Circle also had an OTC (over the counter) trading platform called Circle Trade and an investing app called Circle Invest but it sold both platforms in 2019 and 2020, respectively, as it focused its business operations on its stablecoin.
One of the reasons the company decided to become public is to increase transparency, CEO Allaire said in an interview. He said the company plans to provide the same level of transparency as a bank. To that end, Circle has also applied to become a full-reserve national commercial bank, in the hopes to bridge the gap between traditional banks and digital currencies.
We believe that full-reserve banking, built on digital currency technology, can lead to not just a radically more efficient, but also a safer, more resilient financial system, CEO Allaire wrote in a blog post.
Circles private fundraising rounds
Heres a look at Circles past funding rounds:
- Series A: In October 2013, Circle raised $9 million from five undisclosed investors.
- Series B: In March 2014, Breyer Capital and Oak Investment Partners led a funding round with eight others for $17 million.
- Series C: In April 2015, ten investors were led in a funding round by GS Growth, IDG Capital for $50 million.
- Series D: In May 2016, IDG Capital led a funding round of $60 million from 12 investors.
- Series E: In May 2015, Bitman led a funding round of $110 million from nine investors.
- Venture round: In June 2018 there was an undisclosed investment from two undisclosed investors.
- Secondary market: In August 2018 there was another undisclosed investment from two undisclosed investors.
- Venture round: In July 2020 Digital Currency Group invested $25 million.
- Private equity round: In May 2021 Circle raised $440 million from 11 investors including Fidelity and FTX.
Path to the Circle SPAC IPO
The company began to scale back its business segments in 2019 to focus on its stablecoin and payment operations, selling off its trading, investing and crypto exchange divisions.
Speculation about Circles IPO started in May 2021, after its big funding round of $440 million.
Circle moved quickly after that, announcing its intention to file for an IPO via a SPAC in July 2021. It announced its regulatory filings just one month later.
Unlike a traditional IPO, a SPAC listing is a more complicated process involving a blank-check company that goes public first, whose only intention is to acquire another company and make it public.
When is the Circle SPAC merger date?
Circle plans to merge with Concord Acquisition Corp by the end of the 2021 fourth quarter. The resulting company will be an Irish holding company and trade on the New York Stock Exchange under the symbol CRCL.
The announcement was made in early July and announced the regulatory filings with the SEC in August.
Investors include Fidelity Management & Research Co., Third Point LLC, Marshall Wace and Adage Capital Management. Between the IPO and the $440 million Circle raised in May, the company expects to raise about $1.1 billion in capital. The deal values Circle at $4.5 million.
CEO Allaire wrote in a blog post that while this transaction, and the transformation of Circle into a global, publicly listed company is exciting in and of itself, it is merely a marker in our journey to transform the worlds economic system using internet-native technologies.
Risks and opportunities for Circle stock
Circle has a number of competitors, including Coinbase, which went public in April 2021. Its also not the only company that has issued a stablecoin. However, the fact that Circle is also applying for a bank charter could put it in a unique position to expand its payments and stablecoin offerings. There is also the possibility that USDC could really take off and become a direct competitor to the U.S. dollar.
The biggest risk to Circle is regulation, as stablecoins are still a novelty and how and if they will be regulated in the future is a large unknown. Boston Federal Reserve President Eric Rosengren said in June that stablecoins are like money-market funds but are not actually particularly stable.
USDC is currently managed by Centre, and has proven in the past its willingness to cooperate with regulators.
Bottom line
Circle has found its focus with its stablecoin. If its banking charter is approved by regulators, it could be in a unique position to link traditional banking services with blockchain and other digital currencies.
While its late to the SPAC game, Circle still has potential. And if it can ride through any potential regulation storm of cryptos, the company could rise in value. But it remains to be seen if Circle can convince regulators and the public to trust its stablecoin.
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