Grabbing an investment at a discount is great. Grabbing one for pennies on the dollar… or less… is even better. Such is the case with today’s news that FTX has reportedly come to terms to buy crypto lender BlockFi for $25 million. The kicker: BlockFi’s most recent private valuation was at $4.8 billion, meaning Sam Bankman-Fried and the FTX team are picking up BlockFi for around 0.5% of its previous valuation.
These sort of fire sale prices don’t come around very often. In fact, in the crypto sector, a world where valuations only went up last year, such a headline would seem unfathomable just a few months ago.
There are many reasons for this dramatic discount. With so many coins and tokens down more than 50% from their recent peaks, intense selling pressure has led to liquidations and the discovery of which lenders went in too deep.
Here’s more on what investors may want to know about this combination.
What to Know About the FTX, BlockFi Deal
FTX’s CEO Sam Bankman-Fried now appears to be the “lender of last resort” in the crypto world. His recent $250 million line of credit to BlockFi, as well as support for other crypto companies, is notable. If there’s a part of the crypto market in trouble, investors can be sure Mr. Bankman-Fried is taking a look.
Given the recent fallout from crypto lender Celsius and hedge fund Three Arrows Capital, there’s tremendous concern in this space. Such an environment can provide opportunities to those truly taking the long view of this sector. As FTX looks to grow its influence, it appears to be shopping season.
Reportedly, many of the equity investors in BlockFi are now writing down their equity in the company. It’s unclear where this $25 million will ultimately go, and what assets FTX will be able to acquire. Additionally, other offers are reportedly on the table. However, FTX appears to be the company that’s coming out on top.
It’s expected this deal could take months to close. This is an intriguing story those in the crypto world may want to stay on top of. The whole centralized finance realm of crypto is about to be shaken up.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
