Is DCG best-positioned to be the next big crypto-IPO?
The process of ‘going public’ for any firm or entity can be best described as the pinnacle of success, an achievement that requires more capital to remain successful. Now, an IPO-based company in the digital asset field is a rare sight, but a DCG IPO might have the potential to prosper, if it ever decides to go public.
Messari’s Jack Purdy recently expanded on some of the financial statistics that make a DCG IPO an extremely attractive proposition. Founded in 2015 by Barry Silbert, DCG acts as the holding organization for Genesis Global Trading and the more popular Grayscale Investments LLC. Additionally, DCG also owns one of the world’s largest crypto-media platforms and the retail exchange Luno.
Now, according to the report, DCG generates over $50 million in revenue for Genesis Global Trading, and close to $125 million from Grayscale annually, exclusive of the other two aforementioned entities. The report added,
“On top of that, DCG also has a sizeable investment arm, consisting of both liquid and VC investments that would bring their total valuation to around $4.3 billion.”
$4.3 billion. A meaty valuation that would make anyone purr, but there are plenty more reasons for a DCG IPO to potentially unfold in the future. Here’s how,
An IPO Game requires Effective ‘Underwriting’
Although it isn’t rocket science, the IPO process is not exactly child’s play. A DCG IPO for investors would require a process called underwriting, which is carried out by underwriters. Now, in the traditional market, underwriters are basically an investment firm that bridges the middle ground between the company and the public. The underwriters would raise capital through debt or equity, and once regulatory authorities approve the deal, the organization goes public.
Simple, right? Well, not really.
The reason why there aren’t a lot of crypto-based publicly traded companies is because of their involvement with digital assets, but Genesis and Grayscale might have a smoother case with the underwriter.
Genesis Trading, an OTC crypto-trading and lending platform, facilitated $4.5 billion in spot and $1 billion in derivatives volume in Q3 of 2020, while its lending arm surpassed $5 billion on the quarter. Grayscale’s flagship product GBTC holds more than 2% of the circulating supply, and as we all know, 2020 has been a massive unveiling of Grayscale’s strong position in the industry.
Underwriters and their affinity with Institutional Clients
Now, a major reason why small crypto-entities cannot launch their IPO is that they do not have the institutional clientele to attract underwriters. That’s the icing on DCG’s IPO cake.
While Grayscale’s involvement with institutions is well documented, very few had the idea that due to the specific demand from their institutional clients, Genesis launched their fiat-crypto lending business in 2019. On the Genesis platform, institutional investors and high net worth individuals can borrow cash against their crypto-holdings as well. Therefore, a major part of DCG’s business revenue was raised on the back of institutional clients, a finding that would be music to any underwriter’s ear.
The ‘Barry-Silbert’ Connection?
While the sub-heading makes absolutely no sense, the explanation would.
INX exchange became the first SEC-Registered IPO for a crypto-organization in September 2020. Founded back in 2017, INX is a regulated exchange for cryptocurrencies, security tokens, and derivatives, but it is anything but extremely popular.
This is where it gets interesting. The Executive Managing Director of INX Exchange is none other than Alan Silbert, brother of the individual mentioned in the sub-heading.
From a point of reference, a crypto-IPO business has already been established in the Silbert family. Ergo, for Digital Currency Group, it may be just a question of when, rather than how.