Market Volatility, Souring SPAC Outlook Create Cruel Summer for Crypto M&A

Sometimes it’s friendly and sometimes it isn’t, but long-planned crypto mergers and SPAC acquisitions have been falling apart in the past month.

Since July, five deals for crypto firms’ plans to go public through the back door via mergers with special purpose acquisition companies (SPACs) have collapsed.

This isn’t surprising given the dismal state of the crypto market, where most cryptocurrencies have followed bitcoin’s price off a cliff. The biggest cryptocurrency is down some 65% from in November 2021 high.

Things got even worse in July, as bitcoin stumbled below the psychologically vital $20,000 mark, spooking investors.

Q2 Demolishes Deals

Beyond that, the firms that are public saw dramatically worsening results in the second quarter, with the highest profile crypto firm, Coinbase Global — which eschewed a SPAC merger for a direct Nasdaq listing — seeing its stock price butchered, dropping 64% in the second quarter alone, as trading activity tumbled and it posted losses of $1.1 billion

Read also: Coinbase Upbeat Despite $1.1B Loss, as Shares Sink 10%

The highest profile is the distinctly unfriendly end to the acquisition of crypto custody firm BitGo by investor Mike Novogratz’s crypto investment firm Galaxy Digital got a little more unfriendly Tuesday (Aug. 16), when the spurned seller filed suit, demanding a $100 million breakup fee.

See also: Galaxy Digital Cancels $1.2B BitGo Acquisition

And even that has a public listing aspect: On Aug. 15, Novogratz told the Financial Times that Canadian-listed Galaxy Digital was still committed to a planned but delayed Nasdaq listing, despite having posted a $554 million loss in the second quarter — triple that of Q1 — in part due to losses in the $48 billion collapse of the Terra/LUNA stablecoin ecosystem, which he had supported so strongly that he got a large LUNA token tattoo on his shoulder.

Read more: How a Stablecoin’s $48B Collapse Rippled Across Crypto

That was the same day Novogratz announced that Galaxy Digital was ending the merger, citing what he said was BitGo’s failure to turn over audited financial results in a timely manner.

BitGo reacted with outrage, with an attorney calling the attempt to blame BitGo “absurd,” adding that it had turned over the audited financial statements. “It is public knowledge that Galaxy reported a $550 million loss this past quarter that its stock is performing poorly, and that both Galaxy and Mr. Novogratz have been distracted by the Luna fiasco.”

Walking Away

Not all mergers have fallen apart. Venture capital firm Dragonfly announced on Aug. 15 that it had purchased Metastable, the oldest crypto hedge fund, with more than $400 million under management. And on a smaller scale, crypto market intelligence firm Messari on Aug. 2 acquired the assets and business of Dove Metrics, a crypto fundraising data and intelligence firm.

But the SPAC acquisitions that take companies public have, unsurprisingly, been falling apart across all sectors of the crypto industry as its financial results go into freefall.

On Friday (Aug. 12), crypto mining firm Prime Blockchain and 10X Capital Venture Acquisition, a SPAC, terminated their $1.2 billion merger agreement by mutual consent. A month earlier, on July 20, crypto miner VCV Digital Technology and Fortune Rise Acquisition Co. also called it quits.

Read more: Crypto Mining Firm Prime Blockchain Cancels $1.2B SPAC

Also on Friday, Voltus, an energy management software firm specialized in connecting crypto miners with electricity markets parted ways with Broadscale Acquisition Corp. SPAC on a $1.3 billion merger.

Crypto trading platform eToro and the FinTech Acquisition Corp. V SPAC ended a merger on July 5.

While saying that eToro — a “social investment” crypto firm that incentivizes successful traders who acquire followers who invest according to their portfolios — “a proven track record of growth and strong momentum… the transaction has been rendered impracticable,” said Betsy Cohen, chairman of FinTech Acquisition Corp. V.

Then on July 25, Apifiny, a crypto trading firm focused on the institutional investor market, terminated a $530 million merger with Abri SPAC 1.

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