BlockFi is in full focus after a report from Axios showed the crypto lender had agreed to an option to be bought out for up to $240 million by FTX. The specific acquisition price would include performance incentives. In addition, FTX did not disclose how much it would potentially pay upfront. It will also provide the company with a $400 million revolving credit facility that is “subordinate to all client funds.”
In June, FTX provided BlockFi with a $250 million revolving credit facility. This was because BlockFi was forced to liquidate a “large client,” which investors speculated was Three Arrows Capital (3AC). The speculation is over, however, as CEO Zac Prince seemingly confirmed the large client was 3AC in a tweet today.
The company also experienced volatility due to Celsius’s insolvency issues and general crypto market volatility. Furthermore, BlockFi announced last month that it would be cutting 20% of its workforce, or about 170 jobs.
In total, the FTX deal reflects a potential value of up to $680 million. Let’s get into the details.
BlockFi Agrees to Deal With FTX
Prince stated the variable acquisition price of up to $240 million will be based on “performance triggers.” Still, $240 million is nowhere near where BlockFi was last valued during a funding round last month. The round valued the company at $1 billion and was characterized as a “down round.” A down round occurs when a company seeks to raise more money, but discovers its valuation is lower when compared to the previous funding round. During March of last year, BlockFi raised $350 million at a valuation of $3 billion.
Prince also disclosed that BlockFi experienced an $80 million loss from the 3AC catastrophe. He added that the company has “no further exposure” to 3AC, and that customers will not be affected by the loss. In addition, the CEO sought to comfort its customers by stating that BlockFi has “zero client funds in DeFi protocols.”
He adds BlockFi took on the $400 million credit facility to increase liquidity and protect customer funds. Prince explained:
“The FTX US platform and products are highly complementary to BlockFi and we anticipate enhancements to our services through increased collaboration. Expect more exciting news to come on this soon.”
It seems Prince is upbeat after receiving the offer from FTX. All eyes are on BlockFi as investors and users wait for further developments.
On the date of publication, Eddie Pan did not hold (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.