BlockFi agrees to an option to be acquired by FTX for up to $240M, plus a $400M revolving credit facility; BlockFi CEO: “we continue to see a healthy ecosystem”

Axios 2022-07-04 Dan Primack

Context & Ripple Effects

BlockFi’s financing discussions with FTX moved quickly from a $250M revolving-credit term sheet to reported talks over an equity stake with no agreement yet. The new arrangement turns that support into a $400M facility paired with an acquisition option.

Reports days earlier described FTX as nearing a far lower-priced purchase term sheet for BlockFi; the agreed option establishes a stated ceiling while preserving FTX’s ability to provide liquidity now.

First-order effects

BlockFi gains access to a $400M revolving credit facility, while FTX obtains an option to acquire the lender for up to $240M.
FTX moves from a prospective investor in unsettled stake talks to a financier with a contractual path to ownership of BlockFi.

Second-order effects

BlockFi’s funding and potential sale process become tied to FTX, concentrating both its near-term liquidity support and strategic optionality in one counterparty.
The sequence from credit line to acquisition option gives distressed crypto lenders a concrete example of rescue financing being structured alongside control rights.

Third-order effects

If this structure is repeated, crypto-market stress would shift more ownership of lenders toward firms able to supply emergency liquidity, rather than toward conventional standalone fundraising.
The later collapse of FTX, noted in the relationship record, makes the episode a reminder that concentrated rescue financing can transmit the financier’s own failure across dependent counterparties.

The trend: Crypto-market stress is pushing lender rescues toward financing packages that pair immediate liquidity with acquisition rights.

Discussion

@blockfizac Zac Prince on x
(Long thread!) Excited to share an update on our previously announced term sheet with @FTX_US - and how we've broadened the scope of the initial deal for the benefit of all key @BlockFi stakeholders.
@blockfizac Zac Prince on x
Yesterday we signed definitive agreements, subject to shareholder approval, with FTX US for: 1. A $400M revolving credit facility which is subordinate to all client funds, and 2. An option to acquire BlockFi at a variable price of up to $240M based on performance triggers.
@concodanomics @concodanomics on x
Basically, Sam Bankman-Fried bails out all the systemically important crypto banks and forms an entity to oversee them, which will provide emergency loans at discounted rates in times of extraordinary stress. Kinda like a central bank.
@nobsbitcoin @nobsbitcoin on x
BlockFi Strikes Credit Deal With FTX US, Outlines Acquisition Path - $400 million revolving credit line - option to acquire the firm for up to $240 million - Three Arrows Capital's liquidation resulted in $80 million loss for BlockFi https://www.theblock.co/...
@zguz @zguz on x
Still think the BlockFi 🤝 FTX US deal is a big win for customers (for now) Still think the overall risk contagion is far from over Dominoes are still falling. Sharks still swimming 🦈 https://twitter.com/...
@iamwallst10 @iamwallst10 on x
Tl;dr > Net 3AC loss to BlockFi ~$80mm > Equity valuation likely down 90%+ from $3b > Credit line ($400m) and higher interest to increase mkt confidence > no halt in withdrawals and retail wins > more FTX + BlockFi collab Well played @SBF_FTX @BlockFiZac @BlockFi 👍👏 https://twitt…
@buckycantor Bucky Cantor on x
Two lawyerly questions: 1. Why ‘subject to shareholder approval’ if you're two priv companies? It takes 5 mins to sort... 2. What are the ‘performance triggers’? Blockfi is loss making... Seems like @BlockFi shareholders get paid UP TO 5% of last valuation round. Brutal. https://…
@blockworks_ @blockworks_ on x
Binance's CEO @cz_binance says that Binance is having acquisition conversations with more than 50 crypto companies https://blockworks.co/...
@brett_ftx Brett Harrison on x
FTX US is looking forward to working further with @BlockFiZac and the @BlockFi team! We're excited help bolster BlockFi's business and work together on paths towards strategic partnership! https://twitter.com/...
@sbf_ftx @sbf_ftx on x
Really excited to work with @BlockFi https://twitter.com/...
@pt Parker on x
I am genuinely confused how you sell for pennies on the dollar and the post-mortem characterizes it as a minor oopsie. https://twitter.com/...
@pitdesi @pitdesi on x
Actual price for BlockFi is “up to $240M” depending on performance + a $400m revolving credit facility. Still a far cry from the $3B a year ago (& we have no idea what's in the performance triggers and whether they will hit them)... https://twitter.com/...
@frances_coppola Cassandra Schadenfreude on x
Let's unpick this. It consists of two elements: - a call warrant with a variable strike price conditional on unspecified performance triggers - a subordinated credit facility. Both are bad news for ordinary shareholders. https://twitter.com/...
@crypto @crypto on x
The deal represents a discount to BlockFi's $3 billion valuation as of March 2021. BlockFi CEO Zac Prince said the company had about $80 million in losses from bad debt of Three Arrows https://www.bloomberg.com/... https://twitter.com/...
@ummjackson Jackson Palmer on x
“up to” doing a lot of work here https://twitter.com/...
@byrnehobart Byrne Hobart on x
You thought the crypto boom was over, but BlockFi's valuation went up almost 10x in a day! https://www.axios.com/...
@tomaxwell Thomas Maxwell on x
FTX to BlockFi https://twitter.com/...
@krugermacro @krugermacro on x
This is good news for the industry IMO. It removes uncertainty. https://twitter.com/...
@stephanlivera Stephan Livera on x
So the earlier leak was way off, $240M not $25M, and with a $400M credit facility. https://twitter.com/...
@haseeb Haseeb Awan on x
It's easy to criticize others but this seems to be a very good outcome for Clients. The stakeholders ( Investors/Founders/Employees etc) will absorb the losses. ( Disclosure: I've no relationship with BFi) https://twitter.com/...
@northrocklp @northrocklp on x
This is actually a pretty favorable outcome all things considered. https://twitter.com/...
@forexlive @forexlive on x
How does an $80m loss on a company that's raised $1 billion lead to a firesale? This is certainly not the whole truth. https://twitter.com/...
@tomaxwell Thomas Maxwell on x
it's just an option but still, blockfi has raised more than $2.1 *billion* from investors, so they're basically wiped out https://twitter.com/...
@twobitidiot @twobitidiot on x
Just to cut through the noise: + BlockFi took $80mm loss on 3AC + The issue was *fear* of a bank run + BlockFi's unwillingness to suspend withdrawals which led to a sale ("customers before company" broke the bank) + FTX deal locks in capital; upside for BlockFi principals
@coindesk @coindesk on x
JUST IN: BlockFi and FTX US reach deal that gives the exchange the right to acquire the crypto lender at a valuation up to $240 million, based on “performance triggers.” @realDannyNelson reports https://www.coindesk.com/...
@tomaxwell Thomas Maxwell on x
“up to” so still could sell for $25M, lol https://twitter.com/...
@danprimack Dan Primack on x
Again... We have zero clue how much of the $240 million is guaranteed. https://twitter.com/...
@danprimack Dan Primack on x
It's official: FTX has a deal with BlockFi. $240 million is high end of price range (as we reported earlier, all the deals include earnouts). No word on the low end, which may well be that $25m. No matter what, a huge loss for the investors.
@tomaxwell Thomas Maxwell on x
blockfi gave FTX the option to sell for 1/10th its last fundraising valuation, yikes https://twitter.com/...
@ryanlawler Ryan Lawler on x
FTX signs deal that could buy BlockFi for up to $240 million https://www.axios.com/...
@benhuh @benhuh on x
Lots of seed round caps are above $25M... (Yeah, I know cap is not cash.) https://twitter.com/...

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