FTX to Buy BlockFi at a Discount of $25M and 99% Below the Lending Platform’s Last Valuation

Summary:

  • FTX is inches away from finalizing its acquisition of the BlockFi lending platform.
  • According to CNBC, FTX will pay $25 million for the deal, which is 99% below BlockFi’s last valuation.
  • The move will wipe out BlockFi investors and write off the value of their losses.
  • The discounted sale of BlockFi comes days after FTX provided a $250 million emergency line of credit to BlockFi.

The Sam Bankman-Fried-led crypto exchange of FTX is inches from finalizing the highly speculated acquisition of the BlockFi lending platform.

According to a CNBC report, FTX will purchase BlockFi ‘for pennies on the dollar’ at a total cost of $25 million. This amount is 99% below BlockFi’s last private valuation of $4.8 Billion. The deal will essentially wipe out the lending platform’s investors and write off the value of their losses.

However, the deal could take several months to complete. Furthermore, and according to sources, the final price tag could also deviate between today and tomorrow, marking the end of Q2, 2022. The latter event will likely exert pressure for the deal to be finalized.

An acquisition deal will put to rest days of speculation as to whether FTX was buying a stake at BlockFi or buying the crypto lending firm altogether. It also comes one week after FTX offered BlockFi a $250 million line of credit.

CNBC also added that there was more than one deal on the table for BlockFi.

In addition, rumors were hovering that Morgan Creek Capital was attempting to gather funds to counter FTX’s acquisition offer. The hedge fund has equity in BlockFi, and the FTX deal will essentially render it worthless. Morgan Creek Capital’s attempted fundraising was focused on preventing the earlier mentioned investor wipeout.

Sam Bankman-Fried Continues to Stay True to His Mission of Acquisitions.

FTX allegedly being close to acquiring BlockFi is in line with Sam Bankman-Fried’s comments to Bloomberg in late May when he stated that the crypto exchange had set aside $2 billion for acquisitions during the crypto bear market.

In the interview with Bloomberg, he explained that FTX was a profitable company, and the company was open to acquisitions. He said:

FTX is a profitable company. You can look at the amount that we’ve raised over the last year or two — it’s a few billion dollars. That gives maybe a sense of where we are in terms of cash that was explicitly viewed from a potential acquisition angle.

It’s always something that we’re going to be open to and keeping our ears to the ground on.

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