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”
Troubled crypto lender BlockFi said Friday that it agreed to an option to be acquired by FTX for up to $240 million.
AxiosDan Primack
Context & Ripple Effects
BlockFi’s financing talks with FTX moved quickly from a $250M revolving-facility term sheet to reports that FTX was considering an equity stake without an agreement, then to a reported purchase term sheet. The finalized arrangement pairs liquidity with an acquisition path, giving FTX a more formal role in BlockFi’s survival.
The later collapse of FTX makes the episode consequential beyond the two firms: a lender’s rescue financing was also a concentrated exposure to the rescuer. That connection is central to understanding the arrangement’s longer-term significance.
First-order effects
BlockFi receives access to a $400M revolving credit facility, while FTX obtains an option to acquire the lender for up to $240M.
FTX moves from preliminary financing discussions to contractual leverage over BlockFi, following the earlier unsettled talks over an equity stake.
Second-order effects
BlockFi’s creditors and customers become more dependent on FTX’s ability to fund the facility and exercise its acquisition option rather than on BlockFi operating independently.
FTX’s subsequent collapse turns that concentrated dependency into a source of legal and financial fallout for the parties tied to the proposed rescue.
Third-order effects
The episode shows how emergency credit facilities that include acquisition rights can transfer distress from a borrower to a single, systemically important counterparty when the rescuer fails.
As later FTX bankruptcy costs illustrate, weak records and corporate controls can make the unwinding of interconnected rescue arrangements materially more expensive.
The trend: Crypto-market stress was concentrating lending and acquisition power in a small set of liquidity providers, while increasing the cost of counterparty failure.
(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.
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.
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/...
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/...
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/...
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/...
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/...
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
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/...
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.
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.