Circle, the company behind USDC stablecoin, completed its initial public offering (IPO) last week, priced at $31 per share (higher than the initial expected range of $24 to $26). The first-day closing price was $84, and by the end of the week, the stock price had exceeded $107. It would not be an overstatement to say that investment banks severely mispriced this IPO. Similarly, it is not an exaggeration to say that Wall Street's investment enthusiasm for crypto assets, especially stablecoins, is high.
Reasons to be bullish on CRCL:
· This is currently the first and only listed investment target focused on stablecoin growth in the market, an investment opportunity investors have been waiting for seven years (including Arca).
· The stablecoin market is expected to grow to over $1 trillion in assets under management, which alone is enough to constitute a good investment story.
· USDC currently has $60 billion in assets under management, with a year-on-year growth rate of 91%.
Reasons to be bearish on CRCL:
· It is a business model completely dependent on interest rates, with all revenue coming from interest income;
· Circle relies on Coinbase as an issuing agent, with Coinbase taking about half of the interest income;
· Circle also relies on BlackRock, which has partnerships with many banks that are trying to enter the stablecoin market and compete with Circle and Tether;
· In the past three and a half years, the company has had almost no revenue and profit growth (although EBITDA increased by 60% year-on-year);
· The current stock price of $107 is overvalued, with the following valuation metrics:
· About 30 times gross profit;
· About 110 times earnings;
· Adjusted EBITDA of about 59 times. (Annualized as of the first quarter of 2025)
About my open letter to Circle CEO Jeremy Allaire
Many of you may have seen the tweet I posted and the subsequent news reports about the open letter to Circle CEO Jeremy Allaire. The language in the tweet was somewhat harsh, and I have deleted it as it does not represent Arca's official position. However, I want to clearly state that I still stand by the core points I expressed.
In my view, Circle's choice to allocate shares to traditional financial institutions (TradFi) rather than crypto-native funds during the IPO allocation process was a huge mistake. They should be held responsible for the implied message behind this decision.
We have communicated with multiple crypto funds and companies, including many early users and promoters of USDC (including Arca itself), and some even have closer relationships with the IPO underwriters JPM and Citibank than Arca. We received clear feedback from these industry leaders - they either received very little allocation or no allocation at all, further confirming Circle's bias towards traditional Wall Street financial institutions while ignoring crypto-native supporters.
I cannot find any crypto-native institution that received fair treatment in this IPO allocation. This situation is absolutely ridiculous and shows Circle's extremely short-sighted behavior.
Why am I angry? Not because of emotions, but because of principles
Those who know me or have invested with Arca know that I am not an emotional investor. On the contrary, I always remain rational and focused on investment logic rather than personal emotions, whether in favorable or unfavorable market conditions. However, when it comes to "correctly" promoting the development of the crypto industry and adhering to principles of integrity, I am extremely passionate and emotionally invested.
Since its establishment in 2018, Arca has been at the forefront of the crypto industry, speaking and fighting for this industry. We have spent a lot of time initiating and winning rights protection actions against some crypto companies that were poorly managed and harmed investors or customers. Many people once believed that token holders had no rights - we overturned this wrong perception and risked losing our reputation in the process, but we believed it was worth it.
We have always exposed what we consider to be industry fraud and misconduct, even if it means having some very uncomfortable conversations with friends or partners. This is equally worthwhile. We have also publicly criticized traditional finance's misunderstandings and misclassifications of the crypto industry - such as lumping all tokens together and ignoring their significant differences.
We have also pointed out that some companies in the industry deliberately distort narratives for personal gain, harming their peers who are developing together. Additionally, we have always been honest about our own mistakes and promised to continue doing so. We have spared no effort to educate and promote the advantages and disadvantages of crypto technology globally, with the aim of enabling investors and users to make informed decisions based on facts, rather than being misled by media or other unreliable entities.
Ultimately, we support all forms of crypto industry development. Whether misunderstood or not, we have always believed we have a responsibility to use our voice to expose fraud, reveal bad actors, and point out poor decisions - with the goal of making the entire industry stronger and healthier in the long term. This time, we are issuing a "citizen's arrest" to Jeremy Allaire and Circle - your actions deviate from the original intention of crypto.
I am not an idealist, I just believe in "customer first"
I am not a naive idealist. I truly believe that when you make your customers wealthy, your company will naturally succeed. Look at Binance, Hyperliquid, and even projects like Axie Infinity that are currently facing challenges - their founders, employees, customers, and investors still maintain high satisfaction. Why? In one word: "Alignment".
This is not a new concept. As early as 2018, before Arca even had a website, I wrote articles about the lack of alignment in the stock market. In 2020, I criticized Airbnb and DoorDash for not letting their customers share financial dividends during their IPOs. I also wrote about Coinbase's attempt to issue stocks through a direct listing, which was a respectable attempt, although this method also has risks - such as lacking investment bank support to educate investors.
For the past eight years, I have emphasized that tokens are the greatest capital formation and user growth mechanism in history because they can immediately align the interests of all parties, turning customers into core users and brand advocates. However, in this IPO, Circle completely and deliberately ignored its customers.
Arca's long-standing cooperation with Circle - why is this IPO allocation a slap in the face?
I cannot speak for all other funds (although many institutions have already stood with Arca and expressed anger about this IPO allocation), but I can speak clearly on behalf of Arca.
For nearly a decade, Arca has been a customer and partner of Circle. When USDC was not yet market-recognized and had almost zero assets under management, we used our platform to support and promote USDC. We defended USDC and the entire stablecoin track, arguing with institutions that called this entire industry a "joke".
Our trading and operations teams worked with the Circle team, providing practical help during product testing, optimization suggestions, and major crises (such as the banking crisis and USDC de-pegging event in March 2023).
Yet in this IPO, we received only an extremely low allocation. This result is tantamount to a slap in the face. Crypto companies like Arca have survived through wind and rain over the past eight years. In this industry, many people and companies support each other and move forward together. When you have the opportunity to increase customer returns through an IPO and enhance their return rates and assets under management - which will ultimately feed back into the industry - this should have been an obvious correct choice.
Why not reward the funds that have been deeply involved and continuously invested in the crypto industry? If these funds get good returns, they can raise more funds and reinvest in the crypto ecosystem - isn't this a virtuous cycle for the industry? But Circle made exactly the opposite decision.
Their Actions Completely Deviate from the Crypto Spirit
This time, Circle did not express gratitude to users or achieve long-term win-win through issuing tokens or creating some interest-binding mechanism. Instead, they generously allocated IPO shares to traditional financial mutual funds and hedge funds. These institutions probably haven't even finished reading the prospectus, don't have digital wallets, and won't truly use Circle's products. They just want to make a quick buck.
To Those Angry at Me, I Also Want to Respond:
"You Arca are just like those crypto users who want to freeload airdrops, thinking that using a product entitles you to benefits!"
Answer: This is half right and half wrong. Indeed, we agree with the idea mentioned earlier that "customers should be rewarded". Any customer who directly contributes to business growth, regardless of size, should be rewarded in some way.
DoorDash's delivery workers and customers should have received DASH stocks; Airbnb's hosts and guests should have received ABNB stocks; Amazon Prime members and merchants should have received AMZN stocks... Such examples are countless. However, the difference between IPO and airdrop is that we are willing to purchase stocks at the same price as others. Airdrops are usually free gifts. More importantly, airdrop distribution is often based on algorithmic formulas, transparent and automated; while IPO allocation is a manual process that Circle can completely control.
"You should blame Citi and JPMorgan, not Circle!"
Answer: This is completely wrong. I was once an investment banker in the capital markets and a trader, dealing with the syndicate desk for nearly a decade, and I know exactly how the entire process works. Indeed, investment banks are responsible for creating market demand, pricing, and collecting initial interest from institutional investors. But the final decision on allocation list and proportion lies with the initiator (Circle).
Circle is the client of this transaction, paying high fees to lead underwriters like Citi and JPM, and having complete final decision-making power. They have the right to view all orders and can directly control who gets how many shares. No matter how good your relationship with the underwriter, it's not as important as your direct relationship with the issuer's executives.
By the way, Arca's trading volume of traditional assets like stocks, bonds, and preferred stocks might be larger than most other crypto funds. We even helped Galaxy (GLXY) when they had difficulties issuing convertible bonds in 2022, tripling the subscription quota and helping them complete fundraising (with Citi as the lead underwriter, who praised Arca at the time).
However, even so, large investment banks will not prioritize small crypto funds in the allocation process. Therefore - this time, the responsibility for allocation lies with Circle, not the underwriters. Circle chose to ignore the needs of crypto funds, either through negligence, incompetent management, or more likely, intentionally.
"This IPO was oversubscribed 25 times - everyone's allocation ratio was compressed!"
Answer: This statement is not entirely true. Don't forget, this is Circle's second attempt at an IPO. (The first time they failed and were forced to withdraw.) This IPO, when it started roadshow in April this year, was actually not going smoothly, for many reasons - the macro market was weak due to trade tariff tensions,
Circle's lack of profitability and dependence on interest rates and partners also raised many doubts. This transaction was struggling initially and only became hot near the end of pricing. Why? Because the market began to realize that this stock would likely rise after listing, so many investors frantically submitted large orders at the last moment.
The IPO order mechanism is a "cat and mouse" game. Many investors deliberately place orders far higher than what they actually want, betting on getting a satisfactory allocation ratio. Early buyers like Arca reported real subscription needs when the order book was not yet established, and we should have received our due shares proportionally. But we were completely marginalized in this operational technique.
The headline of "25 times oversubscription" is likely just a "makeup party" in the final data, which does not reflect actual fairness.
"Stop complaining - this is just sour grapes because you couldn't get any!"
Answer: Exactly right. This is the entire purpose of this article. Whether Circle's IPO allocation will affect its future and USDC adoption is yet to be seen. But we very much look forward to the soon-to-be-published 13F file (institutional holdings report disclosed by US SEC) to see exactly which investors Circle chose to share their growth dividends.
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