Capital Markets: Is IPO and M&A Activity Increasing within the Digital Asset Space? | EBC11

Uh good afternoon everyone and welcome to our session capital markets is IPO and M&A activity increasing within the digital asset space. uh as the digital asset market is maturing, we are uh seeing a fascinating shift uh IPO returning, M&A accelerating and the lines between traditional finance and defy blurring. Um please join me in welcoming my fellow panelists. Uh I'd love for you to introduce yourselves uh briefly, please. Hi everyone, my name is Mitch.

I'm a partner at Fifth Era. We're an investment firm in the space. We have a variety of strategies. Uh the most prominent is fund of funds, probably some of the most prolific early stage venture investors, having allocated uh approximately 50 early stage venture funds. Uh we're also pretty active in late stage, increasingly more so in public markets.

So uh glad to be here.

Hi everyone, my name is Ryan. I'm a portfolio manager at Forius where we're building a FCA regulated institutional asset management business uh focused solely on digital assets. Um we have we have two main products. I run a directional uh token picking fund. So investing in you know top thousand altcoins with Bitcoin and ETH.

And you know the whole emphasis for what I do is really applying fundamental analysis you know with a VC mindset into the liquid kind of token space.

Hey everyone James Newman, managing partner and fund manager at Republic where I run our flagship venture fund.

I'm Jealu. I'm a managing director at Stiffel. I advise companies and founders and builders in their strategic journey in the digital asset space. I spend uh pretty much uh all my time on crypto and digital asset companies.

Thank you very much. Uh let's dive right in and let's start big pictures. So crypto companies started with uh ICOs and 2025 has uh we've seen a wave of uh digital asset firms going public. uh we've already seen five of them uh listing on traditional uh exchanges and uh three of them are um in talks potentially going public. So why now?

Um my first question to you Mitch uh what are the key forces and driver behind uh this increase in IPO uh activity? Yeah, thanks. So, it's actually a really exciting time because basically from November 21 to November 24, there were effectively no digital asset IPOs and there are variety of reasons. You had uh you know the SEC being quite hawkish under the Biden administration in the US uh but effectively a no bid for growth, right? It was very very difficult not just in crypto and blockchain but in tech broadly to go public.

And so what happened in 24 after the Trump administration won and this regulatory shift there sort of returned these animal spirits at least in US public markets. And so we've seen very successful IPOs such as Circle, Gemini, Bullish um really start to show that there actually is a bid particularly for our industry in the public markets and that's creating a kind of rush in the latestage private companies to access that capital. So it's the first time effectively since 2020 2019 that the market really is wide open. The last time that happened only Coinbase made it through. So now everybody is rushing to try to get to the public markets.

So it's a very exciting time. And then on top of that you have this rise of DATs which I'm sure we'll talk about and the other panelists can comment on. But it just goes to show that in the public markets particularly in the US there is a lot of interest now in our space both for you know traditional equity corporate structures but also for tokens.

Just on this um I mean all those those IPOs have been in preparation for for three years now. Um and Gensler has stopped the process and with him going away with the new administration process are much quicker less challenged and there's a broader group of eligible company uh going public. The fun the the interesting thing is that um during those past three years those companies have actually grown their revenues their parimeter their clients. So now they are uh massively and and and they're eligible to a size where they they are meaningful in term of size to be uh to be to to be public. Um because you need a certain size and you needed the industry to grow and to to get this player bigger in order to hit the one to 10 billion type of market cap in order to be meaningful in in this market which was not the case uh uh during like the past the past few years.

Another interesting fact as well is that these IPOs are actually I mean are still priced decently. I would say between five and 10 times the revenues and then they shot up because of a scarcity of uh of of of these assets and the appetite from investor to get an exposure to this to this developing industry. But the bankers are trying to stay shy on on pricing and that's the interesting fact I see uh in in these dynamics. But at least at least the banking side of stuff is back post the kind of regulatory clarity. At least a number of US banks stepped back into being able to actually offer IPOs just in the same way that a number of digital asset companies got debanked.

They weren't able to access funding, financing or any kind of public markets. Um the the latter point to make regarding why now is that if you look at venture capital vintages especially 20 2021 there's been a serious lack of DPI i.e. capital return to investors and so there is this demand from the investors in some of these private companies to actually push them towards uh cynically uh either going via equity routes or token routes into something that is monetizable

and John Malo I actually wanted to ask you you you mentioned something kind of interesting which is that they're pricing at five to time five to 10 times revenue how do the banking teams think about taking assets public where there are no exact comps Right. So you obviously have the exchanges which they maybe look to Coinbase, but if you know you're a company that maybe is a tokenization infrastructure, what are the kind of conversations you're having? I'm I'm genuinely curious. Uh that's a that's a real issue for bankers to price those deals actually be because you you either have um like infrastructure type of player or large fintech players at the comps or the M&A comps which have like 50 times revenue uh 50 times the the revenue. So you are navigating between this massive premium at 30 50 times and when you go to the market you need to be decent and and and and polite to the investor base and at the end of the day the market decides.

So you're not taking uh much risk and you're telling the the founders and the companies that the market at the end of the day will price their company. So it's not it's not a big deal if you're underpriced because the investors and we know that there is um a strong appetite for this type of of securities and companies. But you you can't know if it's between 10 times and 50 times because of this premium that is driven by uh the strategic value and the scarcity and you can't have a precise metrics on this. So when we get the more we get uh companies public obviously you get better comps and it's going to it's going to align everyone on on certain certain pricing.

Thank you Jeanu. Actually, I have one one thing to add. Yeah, go ahead. So, I think if you if you zoom out, there's a natural kind of dem demand dynamic on and that's kind of bidding up the the these these these valuation multiples um from public down into private. And that is basically yes, the IPO markets are open in for crypto and that's been an explosion upwards and there's going to be maybe 15 20 more in the next 12 months.

But from a investment fund flow perspective, most savings accounts can still not access Bitcoin. Uh I'm I'm in the UK. I cannot put IBIT in my savings account. Um I can't put it in my pension and that's going to slowly change. Can Jamalo, can you uh put Bitcoin in your savings account?

Well, this is this relates more on the asset management side, but essentially this asset class is obviously going extreme, but it needs to get to the final user in a sense, which is the final investors and the retail investment base and you need to include this in life insurance company in 401ks and that's how people will get to it and will understand it and this is growing. It's too slow. But we see companies opening up those saving accounts to this asset class through uh I mean it's different in the in the US and in Europe obviously and there's a little bit more challenge in uh in Europe because of the regulation and the us that makes those uh those saving accounts eligible to all the countries in in in Europe. But we see larger asset manager like Amundi recently open up uh and they were pretty pretty um like uh pretty shy on this yet but they're going there and once this asset class is going to the saving accounts everybody will be exposed and will have an understanding of how it works and the IPO market will uh be more visible as well and there's going to be uh more IPOs coming in. Just a last word on IPO is that um essentially it's not dedicated to digital asset companies.

The IPO window has open for all companies like throughout uh sectors. The tech sectors has been a focus and has been very intensive in term of company going public and we are kind of we are based towards digital asset company but it's been the major play in the let's say fintech area um and uh and and this is pretty much the only area and segment where you can raise fund without being profitable that doesn't exist. outside of the the blockchain enabled services companies.

Thank you, gentlemen. Uh hold that thought for a sec because we're going to dive deeper into that. Uh following question, why do so many uh digital assets firm choose um to list in the US? And uh how are regulators like the FCA or the SEC or the Monetary Authority of Singapore um influencing uh listing venue of choice?

Yeah. So I can you know I'm happy to take this one. I mean from my vantage point it really I think the key driver is actually capital right. I think that a lot of the companies would be sort of agnostic to listing venue but if you go to the US you can get a valuation premium on what you might be able to get if you list in Amsterdam or London or other venues. So I think that above all above all really drives a lot of those boardroom decisions because you know you can raise more capital at more attractive terms.

The second part of your question related to the regulation is definitely the SEC in the US was you know as Jean Malo noted taking a long time sometimes more than 2 years in certain instances like e Toro

to run these companies through the S1 and S4 filing process which is required to list in the US

that now has completely sped up and the SEC is sort of waving these companies through.

So I think the two combinations of that has made the US right now the the sort of listing venue of the moment. Um, absolutely. But there's no guarantee that holds.

There's eventually going to be some kind of regulatory harmony. There has to be. Not to say that everyone's going to step on the kind of the same platform. But with the US acting how it is, the FCA, MAS, and other regulators will clearly be looking at the playbook as the Middle East is in terms of what ADX is allowing with spaxs, uh, reopening up those markets is incredibly important, and that regulation needs to be in place. As you mentioned, the S1 form can be very cumbersome.

It can be it can take a long time to complete and the SEC previously were able to arguably make that process a little bit more difficult for those that were looking to list. It is really up to the individual regulators across Europe, the UK and and and Asia to think about what they want because going forward a lot of companies are looking even if they are doiciled in the UK or Europe to list in the US and that's an incredible shame for um these continents.

Yeah, I mean I completely agree. I think London in particular has really like missed a massive chance. They basically had four years where you had, you know, Brian Armstrong and Coinbase,

right,

touring London saying maybe we'll red doicile and the FCA just never really got its act together. The FCA being sort of the main financial regulator in the UK. Now they're putting out, you know, reports and notices that they want to sort of modernize the listing process, potentially reduce stamp duty to make it more attractive for companies. Um, you know, the politics is starting to come into this. you know, Nigel Farage spoke at a conference this week in London and and s sort of starting to champion this industry, politics aside.

So, it's definitely coming into the forefront, but you know, I I live in London, actually been in London 10 years. So, I really feel like London, you know, we we missed this one because the US was closed and we could have been open.

Is there still time?

I don't know. I mean, right now the US is is is firing on all cylinders. Um, but I do I do think there's a natural pull to London, right? I think that, you know, companies that have more of their client base, employee base, maybe even headquarter base in Europe and in London would probably all things equal prefer to list in London and have London-based investors. Um, so, you know, there probably still is time.

London has been excellent over the past 30, 40 years at regulatory arbitrage, letting uh the Americans go first, someone else go second, and then figure out a way to kind of attract a lot of capital. And they did that with derivatives and they did that with precious metals in the 70s. So, it's not completely over yet. And we need to be less focused on what's happening right now and think, you know, a bit more medium-term. And the the, you know, the Labor government has not forgotten about crypto.

It's not polarized. It's not a political thing. Um it's just there's other more pressing issues at the moment.

Thank you. Um as of Sunday, rumor has it that securitize uh one of the leading tokenization platform is in talks to go public via $1 million uh sorry $1 billion spa merger with Caner Fitzgerald. Uh why are some digital asset companies choosing spaxs over IPOs?

The spa offer an accel accelerated route uh for a listing especially a US listing because you have a lot of big queue of company uh at the wanted willing to to to to go public. Um this is one uh one key benefit and then for non- US company that's a good way to partner with someone who opens up the US market which is the largest market

uh for this type of uh product whatever it is uh infrastructure or asset management product investment product

it's could be costly from time to time to go that route. But what's the price of time? Uh that's the question and that's the question we hear from uh from companies willing to to go that route. And what we see as well is that um spec teams are pretty aggressive into scooting in for European companies and uh especially US spec team and they they know how to sell their their their benefits. So they have a compelling arguments uh and there are many many discussions right now uh between us pack teams and and and eligible uh European company.

The good thing as well is that you can spack uh when you are I mean get acquired by a spack and then list in the US starting like a few hundred million of valuation like uh you get in start getting interesting in at 500 million from 500 million to 1 billion that's a compelling uh size for a spec they look at you uh and going public in the US with this with a valuation less than 1 billion it's it's it's not as easy and you won't be the first one and you won't be uh the most visible one in front of the investor base and in front of the SEC as well. So um so that's that's a very compelling and active route right now.

Yeah. I mean the way I think about it is there's three main ways to get listed. You have your traditional IPO, your direct listing, and your spa. And all of them have, you know, different pros and cons. Your traditional IPO is sort of the most glamorous, but it's the most gatekeep, right?

You have bankers like Jean Malo who kind of decide who goes in what order. And so, as he mentioned, the spa is a way for you to sort of accelerate the process, and you put your destiny in your own hands. Direct listing is very attractive but only to brand name recognition companies that are very large with dispersed shareholder bases. So you have your Spotify, your Coinbases. So if you're smaller, you're less known, there's not a big retail following.

Direct listing is not really an option. There's only been like 10 direct listings in the last seven or eight years. So if you're basically the Spack is open to a wider range of companies which can't have a negative, you know, selection bias. You can have worse companies going that route. Um but both are just effective routes to get to the US public markets.

Thank you.

The the other part I just want to quickly mention is that um why why spack? There's just a number of companies that are not yet ready in terms of the requirements especially pertaining to the US of what an IPO would need for example 3 years of audited financials and certain liquidity windows are only open for a period of time. And so the question is do you go public now? Do you wait continue to focus on growing and wait for the next window or is the time now for this and and spaxs offer a relatively fast seamless route towards doing that?

I mean when when you want to IPO essentially you have to be ready to wait

because it's a very very long process to to get IPO ready. [snorts] uh if you want to go to the US, if you are a European company, you have a like an audit auditing requirements that that are that is challenging and it's it's massive work in order to get ready and and and eligible to this type of transaction. And that's why the Spark Routt is interesting as well because it's a more intimate uh preparation where you can do the work on your side with a partner and under the radar uh which which makes you uh be more prepared um and and and you can think about your business model and your go to market. you don't get the visibility you get from an IPO from a branding perspective

but from um liquidity and business preparation that's actually more comfortable and uh and and companies like this aspect of the confidentiality of the preparation

around the same theme uh we're also seeing more preipo secondaries are these helpful tools for uh price discuss and cap table clean up or risky signals um to the market

secondary. So that that's um the type of transaction that has massively uh exploded recently just because uh as Jen said

uh early investor needs to return money to their LPS. So that's one key area. uh where you need to unlock some liquidity for early investor for employees as well and with the lack of uh public market in Europe for instance or maybe when you are not IPO already as we just said you want to alleviate this internal pressure for stakeholder and shareholder to monetize they've been supporting the companies for a long time and now it's time for them to uh to to bring them and to return a little bit of money. Then it's a way as well for preIPO company to clean up and optimize their cap table by switching early investor often VCs with more institutional investor and often and ideally crossover investor meaning investor who invest in private companies on private stock and can deploy as well on public stock. That's the crossover mandate.

So they support the IPO in the the the the companies in that in that in that route. Um and what we see we were pretty active in this. Um there are two ways to do it and the best way is um for management to drive that,

right?

And they can price and put a value on their company and they dictate the value. Well, that's a discussion but uh with the banker but

they drive the value before uh before a public transaction

and you can build a strategy whereby you do various round of secondaries and you can show an increase in value. Obviously, it needs to be commensurate with the deployment of the business, but you can start building a story in order to get to the price.

Absolutely.

And to get comps uh in when when you when you go public.

Yeah. So, we've been very active in this. We've probably done three preIPO secondaries this year alone. And I think there are structural reasons as well, which kind of tie into the the first question. Prior to the downturn in our market, you had sky-high valuations in 2020, right?

So, you had companies pricing at a hundred times earnings and just multiples now that they're just hard to make sense of. And so, basically, these companies have sort of been stuck, right? And they and they haven't been able to do much and it's very difficult to go raise new primary rounds at drastically lower valuations. And so the sort of company arranged preIPO secondary is very in vogue right now because it allows this cap table cleanup. It allows some early liquidity for these investors.

It allows new investors to come in who would be excited to do a public listing or an M&A even if it maybe is below that prior round from 2020 but for them would still be a markup. So that sort of structural dynamic I think underpins the fact that now you have very very active secondary markets particularly in the big brand names names that we all know maybe like Kraken companies like this where the secondary markets have become fairly liquid.

Thank you. Uh moving on to uh M&As. Uh what's driving most of the M&A deals you're uh seeing? Is it consolidation, distress acquisition or strategic entry from tread five players? James,

yeah, it's it's a mix of all of them. In reality, there's there's clearly some consolidation between players. There's also the purchases of uh that thin part of various parts of the stack. If you take a custodian for example, they are that base layer. They're that entrance into digital assets.

And on top of that, you have things like staking, payments, trading. those type of infrastructure make sense to be consolidated in in similar ways that for example Coinbase has a full spectrum offering and many of the exchanges do as well. There's the other part to it where people have built in previous cycles and they've built fantastic products that maybe had a very solid product market fit for 2020, 2021, but with the change in regulation, governance and things that are required for the institutionalization of the space. Maybe they're not quite there, but they have great tech. And so these things can be acquired not necessarily as distress or you can acquire teams that can then build that internally into existing operations that are looking to be further institutionalized.

Now I like I like what what you said talking about the companies deploying and building a specific piece of the infrastructure stack. You have great builders who build great things but it's difficult to again this is an infrastructure play and and every everyone is playing with each other and needs to work with each other and it's often difficult for these companies to

raise fund to deploy as a on a standalone basis and that's what driving M&A as well they are getting closer and acquired by the adjacent product like staking with custody services for instance there are certain pieces who are not meant to be standalone and they are a piece of a larger um piece work and that's that's that's the like the functional aspect of it is a key trend and what's driving this as well is who I mean who are the players and the driver of this trend we see that uh large crypto companies are pushing this because they have they they have the right understanding of the market. They have the operational velocity and now they have a massive pile of cash to deploy. So they are doing that and they are deploying uh their capabilities beyond the digital asset or blockchain enabled infrastructure but to the traditional finance and that's what I I see and and I find very interesting is large crypto companies eating up um the traditional finance and capital market space and they're going faster than banks. Banks will catch up and they they have an investment thesis. They have the best understanding of this of this market.

They have slightly um less cash to deploy and slightly lower operational velocity, but it's coming. Uh the investment thesis is here. They know what to do and uh and I'm I'm I'm happy that they're getting there. Um

how long will it take? for the incumbent incumbent financials to really start making significant acquisitions. Is it 12 months, 18 months, years?

Let's say it's difficult to say depends on the on the on the on the player, but it's a matter of months. It's 26 essentially.

But the other advantage that um listed companies, banks and others have is there's two parts. There's strategic investments and there's principal based balance sheet investments. And on the balance sheet side, it's great for founders because whether it's a cash or a stock purchase, you're getting something that's liquid, which is which is an exit. And from a venture venture perspective, that's also great. It's great for your LPs.

And I think there's a lot of consideration when a private company is buying another private company or a private company's buying part of that stack. Your equity is just getting converted into something else that is illquid. Whereas there is that real advantages from some of the listed exchanges take a a Coinbase that can offer its stock as part of that transaction and sure it may vest over X amount of years but it's still liquid and you know it's going to be liquid whereas you're taking an unknown uncertainty on when a private company could may if go public.

Yeah. Yeah, the only thing I'll add here is I think for me uh the sort of firing gun on traditional finance and crypto starting to come together was the Stripe uh purchase of bridge and I think a lot of people in the traditional space really woke up and said okay this is a real thing now and you know we need to get on it. I think if you look at what some of the exchanges are doing, you're seeing sort of traditional exchanges like Robin Hood make purchases of crypto exchanges and move that direction and you're seeing the vice versa as well, right? So Coinbase buying derabit, uh, Kraken buying Ninja Trader, right? So I think that especially the more forwardthinking tech enabled traditional finance venues where you buy stocks and bonds and things like that, they're they've all woken up to that.

they probably were a bit behind on this and M&A is a really sort of efficient way to to play catch-up.

Thank you. So M&A today is about strategic positioning for the next phase of digital assets and whilst we have talked uh a lot about the US um which continues to dominate IPO and acquisition Europe Europe is taking a different path and since we're we are at the European blockchain convention uh let's take it closer to uh home. Um tokenization especially of equities, funds, uh private shares uh may well represent the next generation of uh those same functions just delivered via blockchains. We've seen um Robin Hood for example launching their offering of uh tokenized equity. Um we've seen Mastercard back in June uh announcing that 50% of their uh transaction in Europe are now tokenized.

So how do you see tokenization transforming Europe's capital market? The the way I look at it is from the banking perspective like traditional bank they now have understood that their balance sheet and pretty much all their balance sheet will get tokenized at one point and as it relates to M&A they need to make actually acquisition to be able to build the technical stack

to enable their balance sheet to to be tokenized and to deploy their operational businesses and capabilities to the tokenized version of their of their existing business. So that builds that that requires building partnerships and um banking institution are using a best of breed approach where they use specific partners and at the end of the day they need to choose which one they need to integrate and there is not so many eligible candidate out there. for instance custody. You don't have like thousand of custodian and you really need this piece because that's the key enabler for your entire balance. So

that's another driver of uh of him here.

I mean I I think for me this is kind of a a warning for Europe, right? I think um you know if US capital markets lead on tokenization and you with a Kraken account or an OKX account can buy effectively all US financial products in a tokenized very easy efficient way. You could you effectively see US capital markups soak up even more global capital the way we've seen it with stable coins the way we've seen it with money markets the way we've seen it with you know the S&P 500 ETF. So, I think Europe really needs to move quickly on this because it is definitely coming, right? Robin Hood, Kraken, Securitize, they haven't exactly truly tokenized uh stocks and bonds yet.

What effectively they're doing is putting stocks into SPVS and tokenizing the units. So, you're you're effectively trading units that are holding stocks, but those have become wildly popular already. And so if you know I really think Europe needs to move quickly here because just like how US dollar stable coins effectively are 99% of the market. If you can buy all of the US stocks much more easily than the European stocks, that's going to be a massive competitive disadvantage. Thank you.

Um let's pick up the pace a bit and go through a quick round of uh fire questions. um just one sentence answers or one word for the bravest of you. So let's start with number one. Start or end of cycle?

Start or end of cycle in your opinion?

Middle.

Start or end of cycle?

Middle.

It's it's zero zero. James

Amido pre-start. [laughter]

Okay. When will we see uh a crypto IPO in Europe?

2026.

Okay.

When will we see a cryp IPO in Europe?

Yeah. 2026.

Uh late 2026.

Okay. 2026 or before.

Okay. Ambitious. Who could be the next candidate to go public in Europe? Starting with Jelo.

Can you say it again, please?

Pardon?

The next candidate to go IPO in Europe.

I won't tell. He wouldn't tell me.

They They might be in the room.

Uh maybe leisure.

Okay. Um a fan favorite year and Bitcoin prediction. Starting with you, Mitch.

Higher than we are now.

Okay.

Yeah. Where we are now? 153k. H

how much did you say?

150

153

154. [laughter]

Okay. Uh thank you. That was uh the fun part. Uh let's zoom out and uh close on what comes next. Uh, is this wave of listing um and M&A activity sustainable or just a short-term rebound?

I think we're just at the beginning of of consolidation and public listings. And, you know, unless something monumental happens in public markets, uh, I think we're at the beginning of this phase.

Okay. Right.

This is a long-term secular trend. Um, forget about the price of Bitcoin and the valuations of recent listings. um this technology will be bought up and integrated. Uh it's been around for 10 years, so now it's going to be regulated and allowed. So I'm, you know, very excited over the medium term.

Yeah, I agree. Long-term secular trend.

Yeah, same. And and there's there are still a few players in the industry who have yet to accelerate on this. We have seen the IPO market opening. The VC market has been there for for some times,

right?

Uh M&A is accelerating. We have yet to see the private equity firms now getting into it and they are including uh the blockchain execution in their investment thesis. So we will see them uh being active very soon. And final question, if we look five years ahead, what will define success in digital capital markets? Would you say more listings, deeper liquidity, or the seamless integration of tokenized assets in capital markets?

Yeah, I'll do two quick ones. I'd say more publicly listed companies so retail has greater access and uh more rational and consistent uh valuation methodologies and token pricing.

I I would uh kind of add to the second point where you know token pricing really matches like underlining business economics of what they're building and then there are more institutional man managers uh keeping those valuations in check. James,

I think for me it's when we stop talking about um the blockchain as a product and really it becomes just the enabler and the financial infrastructure has been upgraded and we don't realize things that are tokenized are running on rails and those that come generations after us don't realize and just see it is the way it is.

All right. Uh well, thank you all to our brilliant panel for uh this insightful conversation and uh thank you to the audience. Um I think if there's one clear takeaway, we're witnessing the conversions of crypto innovation and traditional finance from IPOs to M&A to tokenization from startups to traditional exchanges. So, thank you all uh for sharing your insights uh with us today. And if you have any questions, please don't hesitate to um come and meet us after.

Thank you so much. [applause] Thank you.