Nexo reportedly offered $850 million to acquire rival BlockFi in July
According to an ‘indicative investment proposition’ document, cryptocurrency lender Nexo made an unfulfilled bid to buy ailing rival BlockFi as part of a planned deal valued at roughly $850 million earlier this year.
BlockFi has been unlucky
When BlockFi received the proposal in July, it was in trouble financially due to an $80 million loss stemming from its involvement in the now-defunct cryptocurrency hedge fund Three Arrows Capital. BlockFi declined Nexo’s proposition and instead stayed with a tentative agreement with FTX.US, which last week filed for bankruptcy together with sibling trading firm Alameda Research.
In the summer, Nexo pitched BlockFi a proposal that was a better option than the FTX proposal. Still, BlockFi’s board decided to go with FTX, according to co-founder Antoni Trenchev. They were puzzled, and there were rumors about conflicts of interest because it did not make financial sense for them to choose an even worse bargain.
Trenchev believes if BlockFi had taken Nexo’s proposal, it might have ended elsewhere. After FTX initially experienced a liquidity problem, BlockFi co-founder and COO Flori Marquez said the corporation was alright, but the impact quickly spread. Withdrawals from BlockFi had to be suspended last week, and the Wall Street Journal announced on Wednesday that the company was getting ready to file for bankruptcy protection under Chapter 11.
Trenchev already knew that Three Arrows Capital, which BlockFi had recently dissolved at a loss, was the second-largest debtor after Alameda. Nexo thinks that BlockFi as a whole, as well as its clients, shareholders, and customers, could have significantly benefited from our plan, which was centered on improved risk management, cost reduction, product innovations, and markets.
Details of the $850 million offer from Nexo
According to Trenchev, Nexo had made BlockFi a contract for about $850 million. The contract cited a $500 million credit line to take care of BlockFi’s liquidity requirements. It also had $30 million for the purchase of 51% of BlockFi using a combination of cash and stock and $30 million payable to BlockFi’s current shareholders..
In addition, BlockFi’s unvested employee option pool was terminated, “thereby enhancing stakes of current shareholders.” Nexo was also granted a 5-year call option on the residual 49% of BlockFi’s stock at a 10x valuation of the plan. The bid for the 49% interest was worth roughly $288 million, bringing the total proposal to only about 850 million.
What FTX’s offer entailed
The total value of FTX.US’s bid for BlockFi was $680 million. It includes an option to purchase BlockFi for up to $240 million and a $400 million line of credit.
According to an email sent to BlockFi executives, including co-founders Marquez and Zac Prince, Nexo was also willing to work with other parties, such as FTX.US, to make its proposition to BlockFi in July.
“We would like to draw your attention to Nexo’s non-binding offer for the ownership of BlockFi. Should FTX choose to opt out of the initiative for any reason, we are ready to investigate the prospect either independently or in combined effort with other investors, including but not restricted to FTX.”
The email stated.
