Circle, the stablecoin issuer behind USDC, is actively pursuing a public listing while also exploring buyout interest. The company remains committed to its IPO but informal negotiations with Coinbase and Ripple have begun. This dual approach reflects changing priorities as Circle aims for a valuation target of $5 billion.
Coinbase is positioned as the top candidate.
Circle has filed for an initial public offering with the SEC, hoping to list this year. While these discussions are still ongoing, Coinbase is seen as the most suitable potential buyer. Although created solely for exploratory purposes, such discussions could lead to something significant happening.
Due to the current relationship between Circle and Coinbase, any potential deal would give Circle an advantage. In 2018, Circle and Coinbase established and led the Centre Consortium to develop their stablecoin, United States Dollars Coin. Circle retained full power after parting ways with the partnership in 2023, and Coinbase was granted equity funding and a share of revenue.
Circle's S-1 reveals that all of Coinbase's revenue in the USDC segment comes from USDC held on their platform. Other USDC reserves have companies sharing net revenue among them. Becoming a partner limits the ability to make certain business moves for Goldman Sachs and Circle.
Some insiders indicate that the companies are so closely related that they seem inseparable. They can oversee critical aspects of USDC and hold some intellectual property rights when Coinbase loses solvency. This framework helps Coinbase remain strong in any plans for future sales events.
Ripple's offer was rejected as too low.
Ripple Labs has also approached Circle with a buyout proposal valued between $4 billion and $5 billion. This proposal includes a combination of cash and XRP, Ripple's native token. However, Circle is said to have declined this offer, citing concerns over valuation.
Ripple's financial strength comes from its holdings of XRP and aggressive acquisition strategy. As of the end of March, Ripple held 4.56 billion XRP on its balance sheet. The company also controls 37.13 billion XRP in escrow accounts, providing significant liquidity.
Ripple has shown interest in expanding its footprint through acquisitions, including the acquisition of Hidden Road for $1.25 billion. However, Ripple's mixed offer did not meet Circle's internal valuation target. The company's preference for cash-heavy transactions may hinder further negotiations.
Despite Ripple's active M&A efforts, Coinbase is seen as more capable for this acquisition deal. Coinbase's cash reserves and public listing status give the company more flexibility. Insiders note that Coinbase is likely to attract more attention if it pursues a formal offer.
The IPO plan is still underway.
Despite interest in M&A, Circle continues to prepare for its IPO. The company filed with the SEC in April and aims to list with a valuation close to $5 billion. The company's IPO plan remains intact, even as alternatives are being considered.
Sources from private equity indicate that the situation changes weekly and market conditions may affect the final decision. Although Circle does not rule out a buyout, the company has not halted its efforts for a public listing. Investors are closely monitoring the outcomes of this dual strategy.
Coinbase has completed several acquisitions this year, including Deribit and Spindle. CEO Brian Armstrong stated that Coinbase is evaluating more deals but remains selective. Any future move to acquire Circle will likely follow a thorough financial and regulatory review.
