Circle plans an IPO, but faces a competitive landscape

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We already revisited the Dan Tapiero quote about an imminent “crypto IPO, M&A, SPAC boom.” And I wrote about the possible “feeding frenzy” coming on the M&A side.

Then late yesterday, Circle, the issuer of stablecoin USDC, laid out plans for an IPO.

“The confluence of traditional financial infrastructure and blockchain innovation, as exemplified by companies like Circle, presents compelling opportunities for institutional investors,” Offchain Labs’ Ira Auerbach said in a statement.

It seems optimism around stablecoin growth (and the potential for legislation) would signal high interest in Circle. Not to mention the potential for the broader tokenization segment.

But it’s worth noting that while Circle’s 2024 revenue was $1.7 billion, it paid $908 million in distribution costs to Coinbase.

Circle’s net income for last year was $156 million. Its competitor Tether, meanwhile, reported a profit of $13 billion in 2024.

Looking at another publicly-traded crypto company: Coinbase’s 2024 net income was $2.6 billion (on $6.6 billion in revenue). Meaning Circle’s net profit margin was nearly five times less than Coinbase’s, Dom Kwok pointed out on X.

Kwok, a former analyst at Blackstone and Goldman Sachs, added: “If the Fed lowers rates later this year (as expected), Circle’s metrics will only weaken further.”

After all, the S-1 notes that 99% of Circle’s revenues come from reserve interest income, which is sensitive to fluctuations in interest rates.

Circle explains in the filing that the emergence of yield-bearing digital assets “represents an additional source of competition, particularly in light of the current high interest rate environment.”

Hence, probably, why Circle acquired tokenized money market fund issuer Hashnote to help market participants more easily move between cash and yield.

There will be plenty to monitor here as to when we could see Circle stock on the New York Stock Exchange, and at what valuation. Stay tuned.

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