7 Crypto IPOs to Watch in 2021–22
The Crypto market has seen tremendous growth since the beginning of 2021 as many companies are endorsing digital assets while some planning to make a Stock Market Debut.
For the first time in history, on January 7th, 2021, Crypto became a trillion-dollar asset class. The combined Market Cap of all Cryptocurrencies made up to one trillion dollars. So it’s not just the prices that are spiking up. But the enormous amounts of money flowing into the Crypto space is boosting the growth of crypto firms. This is the point where some of these companies can even plan to go public.
Every private company has a choice to either stay private or go public. When a company goes public, it offers shares at a predetermined price via IPO. Early Investors become shareholders in the company and earn dividends if the company profits and capital returns if the demand of the shares increases. The main reason for a company to go public is raising capital, liquidity for existing shareholders, improvising credibility of the company, and increasing the company’s market worth.
Crypto Companies can go public through Initial Public offerings (IPO), Direct Listing, Regulation A token sales or Special-purpose acquisition company (SPAC)
- Initial Public offerings (IPO): It is the most common method used by the companies willing to go public. According to PwC, there were 727 IPOs worldwide in the first quarter of 2021 that brought proceedings of $202.9 billion. That’s equivalent to 60% of the funds raised across the whole of 2020.
During an IPO, new shares of the company are created and underwritten by an intermediary. The underwriter works jointly with the company throughout the IPO process, decides the initial offer price of the shares, helps with regulatory requirements, purchases the available shares from the company, and then sells them to investors via their distribution networks.
However, there are many downsides to pursuing an IPO. Such offerings are incredibly expensive for the companies that pursue them, and they have lock-up periods meaning investors who already have shares cannot sell them for up to 180 days.
- Direct listing: Sometimes, companies planning to go public may not have enough resources to pay underwriters, or they do not want to dilute existing shares, or they may want to avoid lock-up periods. Companies with these concerns often choose to proceed by using the direct listing process rather than an IPO.
In this process, no new shares are created. Instead, existing stock is sold to the public, and there are no lock-up restrictions. Therefore, they prevent existing shareholders from being diluted, but funds are raised only when the current stock is sold. Various tech brands like Spotify and Slack are favouring this method.
- Regulation A Offering: Under federal law, any sale of a security must either be registered with the SEC or should meet specific criteria to exempt it from such registration. Regulation A is an exemption from the registration requirements, allowing companies to offer and sell their securities without registering with the SEC. Such offerings are intended to raise capital for small and medium-sized companies that could not bear the costs of SEC registration and allow non-accredited investors to participate in the offering.
- SPACs: Special purpose acquisition companies (SPACs) have become the most preferred way for many experienced sponsors to publicize companies. A SPAC raises funds through an initial public offering (IPO) to acquire an existing operating company. An operating company can merge with or can be acquired by the publicly traded SPAC and become a listed company instead of executing its IPO.
This approach offers different advantages over a traditional IPO, such as companies getting access to capital, even when market volatility and other conditions limit liquidity. SPACs could also potentially lower transaction fees as well as expedite the timeline to become a public company. It also creates greater levels of certainty for shareholders and potentially less volatility than an IPO.
Also read: 6 Trusted Crypto News Platforms
Coinbase Global Holdings Inc. recently became the first crypto exchange to go public on the New York-based NASDAQ through a direct listing on April 14, 2021. The direct listing of Coinbase has legitimized the future of the crypto industry, which was once assumed as a scam by the mainstream finance world.
This event is considered the most monumental moment of the crypto-world and has spurred the interest of other companies to consider going public. The following companies have hinted or even publicly stated of going public in 2021.
- Kraken: San-Francisco based Kraken is the fourth-largest cryptocurrency exchange by trading volume. Similar to Coinbase, Kraken has also enjoyed record volumes in the first quarter of 2021. Moreover, the number of new users has quadrupled since the second half of 2022.
In April, Jesse Powell, Kraken’s chief executive and co-founder said in an interview with CNBC that the company would go public next year through a direct listing, similar to Coinbase. Kraken is reportedly seeking to raise a valuation of $20 billion and is in talks with Fidelity, Tribe Capital and General Atlantic.