Weighing institutional, retail demand for Circle ahead of public debut

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Investors getting crypto exposure via stocks will soon have access to a stablecoin issuer: Circle is expected to list on the NYSE any day now.

While institutional demand for the company’s shares appears robust, retail interest is more of a wild card.

The USDC issuer launched its IPO last week and on Monday boosted the number of shares it plans to offer (from 24 million to 32 million). Circle also set a higher price expectation per share — between $27 and $28.

Generally, underwriters (in this case JPMorgan, CitiGroup, Goldman Sachs, etc.) and their clients seek to slightly under-promise and over-deliver, Architect Partners co-founder Eric Risley told me.

“Both upsizing the number of shares expected to be sold as well as the price range is a crystal-clear signal of strong demand,” he noted.

That said, the roughly $7.2 billion valuation Circle is targeting is below the $7.7 billion valuation it got in an April 2022 funding round.

Risley explained that changes to IPO terms (like yesterday’s) are typically only made after a full assessment of demand. His point: The listing of CRCL shares is imminent.

Some of the strong institutional demand is coming from Ark Invest. Circle said in a Monday filing that the firm is interested in buying up to $150 million of Circle’s Class A common stock at the updated IPO price.

Lorenzo Valente, Ark’s digital assets research director, pointed out in February that stablecoins’ $220 million supply hit roughly 1% of the US’s M2 money supply.

Stablecoins currently have a market cap around $235 billion, according to rwa.xyz data. Ark’s research suggests it could hit $1.4 trillion by 2030.

“They settle more transaction volume across all blockchains than either Bitcoin or Ethereum, highlighting their growing dominance as the foundation of onchain activity,” Valente wrote about stablecoins.

The financial world has woken up to stablecoins’ utility as a fiat-pegged payment tool, especially given US lawmakers’ progress on legislation there (Casey has more on that if you scroll).

BlackRock’s Robbie Mitchnick said in March that while he sees tokenized money market funds as a better cash savings vehicle, stablecoins “will retain their dominance” as the instrument for payment and transaction.

Institutional vs. retail demand

Reports that BlackRock plans to buy Circle IPO shares reinforces Circle’s reputation as “the most institutionally integrated company in crypto,” argued Matthew Sigel, VanEck’s head of digital assets research.

“In a sector still defined by volatility and regulatory overhang, Circle is positioning itself as the ‘boring is beautiful’ trade: profitable, minimally levered, and plugged into the core financial infrastructure of Web3,” he said.

For institutions looking for crypto exposure without balance-sheet risk, the company resembles a high-yield, regulated stablecoin utility, Sigel added. Circle’s core revenue, after all, comes from interest on USDC reserves — much like a money market fund, he said, but with programmability and 24/7 settlement.

“Retail may find it harder to latch on,” the VanEck executive added. “Circle doesn’t have the same volatility, beta, meme potential or brand recognition as Coinbase.”

Speaking of Coinbase, COIN shares started trading on the Nasdaq — via direct listing — in April 2021. The stock opened at $381 and peaked at roughly $430. Shares are now hovering around $260.

COIN has earned a ~4% allocation in VanEck’s new Onchain Economy ETF (NODE), a fund that Sigel manages.

Circle labels “intense and increasing competition” — i.e. from USDT issuer Tether — and “fluctuations in interest rates” among its risk factors.

Despite that, Sigel said it’s rare to find a crypto-native company that is “profitable, growing, capital-light and central to stablecoin infrastructure.” So NODE will evaluate Circle based on its valuation and growth outlook for the stock.

Other crypto equity ETF portfolio managers will also consider a position in Circle as they navigate a growing universe of US public stocks in the segment — Exodus, Galaxy and DeFi Technologies now among them.

“If Coinbase is one of the main storefronts in the onchain economy, Circle could be the payments pipework running beneath it: less visible, but still essential to the flow of capital and trust,” Sigel said.
Keep an eye on Blockworks.co — and your inbox — as our Circle IPO watch continues.

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