- BlockFi’s warrants were marked down to zero by Private Shares Fund, a fund managed by Liberty Street Advisors, in its most recent fund report, according to an analysis of data put together by Bloomberg.
- Last March, BlockFi attracted a valuation of as high as US$3 billion, which was reduced to US$1 billion in the weeks leading up to the recent crypto market meltdown.
BlockFi, which received capital from digital-asset exchange FTX US in the form of a bailout, has asked its equity investors to prepare for a significant markdown on their investments in the embattled crypto lender.
BlockFi’s warrants were marked down to zero by Private Shares Fund, a fund managed by Liberty Street Advisors, in its most recent fund report, according to an analysis of data put together by Bloomberg.
Cryptocurrency exchange FTX extended a lifeline to BlockFi at the end of June through a US$400 million credit facility with an option to acquire the company in an effort to pull BlockFi out of potential insolvency against a backdrop of recent liquidations and a broader market meltdown.
Private Shares Fund specializes in investing in late-stage private companies, and reduced its valuation of BlockFi’s preferred shares recently to an estimated US$20 a share, a sharp decline from US$77 at the end of April.
It’s been said that all investment rounds in BlockFi are treated ‘pari-passu’, meaning that all investors are treated equally, so FTX US’s injection would be treated the same as that of an earlier investor, and result in a dramatic haircut of the value of such an investment.
Last March, BlockFi attracted a valuation of as high as US$3 billion, which was reduced to US$1 billion in the weeks leading up to the recent crypto market meltdown.
FTX US’s transaction with the crypto lender now puts BlockFi’s market cap at around US$680 million, a dramatic reduction from even its most recent down round for funding.
Nevertheless, early investors in the crypto lender will have to stomach the haircut, especially if it raises the prospect that they could one day see their investments turnaround.
FTX is one of the biggest cryptocurrency exchanges in the world and is hugely profitable through its proprietary trading firm and market maker Alameda Research.
Buying up BlockFi at cents on the dollar would help shore up even more power and influence within the hands of FTX and could see BlockFi transformed in the years to come.
Cryptocurrencies have struggled for most of this year, amidst high inflation, central bank tightening and a Russian invasion of Ukraine.
Bitcoin continues to straddle US$20,000, although it has dipped well below this level several times this year.
Investors may see some respite towards the end of the year, on the outside chance that central bank policymakers take a pause from the relentless pace of rate hikes, which would ensure yields remain below inflation and could spark off a new round of risk-taking.