CRYPTO CAPITALI$M
Galaxy Digital terminates BitGo merger, setting up another crypto legal fight
One of the crypto industry's biggest acquisitions appears headed for court.
On Monday, Galaxy Digital said it was terminating a $1.2 billion deal to acquire crypto custodian and prime broker BitGo originally announced in May 2021.
Galaxy said it won’t pay a termination fee, citing BitGo’s failure to deliver “audited financial statements for 2021 that comply with the requirements of our agreement.”
Just hours later, BitGo called the termination “improper,” saying it has hired a law firm to recoup a $100 million “reverse break fee [Galaxy Digital] had promised back in March 2022.”
The now-terminated deal represented the largest corporate acquisition in the crypto sector’s history.
“Either Galaxy owes BitGo a $100 million termination fee as promised or it has been acting in bad faith and faces damages of that much or more,” R. Brian Timmons, a Quinn Emanuel partner representing BitGo said in the company’s response, arguing the merger agreement was not scheduled to expire. BitGo ended 2021 with more than $64 billion in assets held in custody, according to its founder and CEO Mike Belshe.
Since the deal was announced in May 2021, the total value held in crypto assets has dropped by 53% according to Coinmarketcap.
In that same time, shares of Galaxy Digital (GLXY.TO), which are listed on the Toronto stock exchange and trade on over-the-counter markets, have fallen by 73% from $34 to $9 per share.
At the end of its first quarter, Galaxy announced that it would restructure the terms of its acquisition of BitGo due to the decline in the company’s share price.
Galaxy Digital was known as a heavy backer of the Terra blockchain, with CEO Mike Novogratz having inked a LUNA tattoo on his arm months before the $45 billion collapse of Terra’s LUNA and sister coin, algorithmic stablecoin UST in May.
"It is public knowledge that Galaxy reported a $550 million loss this past quarter, that its stock is performing poorly, and that both Galaxy and Mr. Novogratz have been distracted by the Luna fiasco," Timmons added.
Galaxy Digital reported a $554 million loss in its most recent quarterly earnings results, citing the decline in crypto asset prices as well as an unrealized loss charge it took for its crypto holdings. Additionally, the company held approximately $1 billion in cash.
Galaxy's “long-awaited acquisition of BitGo had been part of a broader plan that included to become a Delaware-based company and then to list its stock on a U.S. exchange,” according to Mark Palmer, head of digital asset research with BTIG.
Galaxy said Monday it remains on the path to gain status as a Delaware company with the aim of eventually listing on the Nasdaq.
Bitcoin Miner PrimeBlock Cancels Listing Plans, Terminates $1.25B Merger With 10X Capital
Jamie Crawley
Tue, August 16, 2022
Bitcoin (BTC) mining company PrimeBlock has ended its plans to go public via a merger with blank check company 10X Capital Venture Acquisition (VCXA).
The two firms terminated their agreement by mutual consent on Aug. 12, according to a U.S. Securities and Exchange Commission filing.
Plans for the listing were confirmed in April with expectations that the merger would be completed in the second half of 2022 carrying an enterprise value of $1.25 billion.
No official reason has been given for the decision, but the uncertain conditions in both the crypto and mainstream markets in recent months may have been a factor.
Special-purpose acquisition company deals have been a prevalent means for crypto companies to access public stock markets in recent years, but their attraction has cooled following the downturn in digital asset markets.
In July, trading platform eToro's planned public listing via a $10.4 billion merger with FinTech Acquisition Corp. V was terminated with Fintech Chairman Betsy Cohen saying it had become "impracticable."
Bitcoin Miner Riot Takes $349M Goodwill
Impairment Charge on Acquisitions
Riot Blockchain (RIOT), one of the largest publicly traded bitcoin miners, recorded $349.1 million in impairment charges to goodwill in the second quarter, tied to its acquisitions of miner Whinstone U.S. and electrical equipment provider ESS Metron in 2021, in its second-quarter earnings released on Monday after the close. It also reported an impairment charge of $99.8 million on its bitcoin holdings.
Large impairment changes have been a common occurrence for miners as the prices of cryptocurrencies have plummeted this year. Most recently, peer Marathon Digital (MARA) said it booked $127.6 million impairment changes in the second quarter due to the decline in the prices of digital currencies.
“Although challenging global market conditions in the second quarter, further impacted by a steep decline in the price of Bitcoin and resulting decline in market valuations for publicly-traded Bitcoin miners, including Riot, necessitated non-cash impairment charges this quarter, these non-cash charges had no impact on our solid financial position and ample liquidity, both of which were further strengthened this quarter,” said CEO Jason Les in a statement.
The miner was scheduled to report its earnings last week, when most of its peers released their results. However, Riot said on Aug. 9 that it delayed its quarterly earnings report because it needed more time to calculate how much the cryptocurrency rout, the war in Ukraine and other macroeconomic issues have reduced the value of its assets.
Riot maintained its hash rate growth guidance of about 12.5 exahash per second (EH/s) by the first quarter of next year, which it first forecasted on Aug. 3.
Riot also reported total first quarter revenue of $72.9 million, missing consensus estimate of $75.5 million, according to FactSet data. It currently has 44,720 bitcoin miners, with a hash rate capacity of 4.4 EH/s.
Riot shares fell about 6% on Tuesday. Its stock has fallen about 60% this year, in-line with its mining peers, while bitcoin’s price has been cut nearly in half.
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