The Biggest Crypto Deal That Wasn’t: A Closer Look at Galaxy’s BitGo Purchase


In brief

Initial reports that Galaxy’s purchase of BitGo was worth $1.2 billion overlooked an important factor.
The purchase price appears to include BitGo’s BTC and ETH holdings.

One year ago, crypto giant Galaxy Digital announced it would acquire BitGo, a firm best known for storing customers’ Bitcoins, for $1.2 billion in cash and stock. The Wall Street Journal described it as “the first $1 billion deal in the cryptocurrency industry,” while other news outlets called it the biggest M&A deal in crypto history.

Today, the deal still hasn’t closed.

On a recent earnings release, Galaxy said it expects to finalize the deal by year’s end, and that it now plans to pay additional Galaxy stock to BitGo as part of that process. But the actual value of BitGo as a company is likely to be considerably less than what was publicized.

The reason, according to a person familiar with the deal, is that the deal’s sticker price included BitGo’s sizable holdings of Bitcoin and Ethereum—assets that don’t have a bearing on the underlying value of the company. It would be like valuing a precious metal custodian based in part on the owner’s personal gold and silver collection. (Moreover, the price of Bitcoin is down 30% from one year ago, while Ethereum is down 17%.)

The person with knowledge of the deal, who spoke on the condition of anonymity, declined to say how much of the $1.2 billion price could be chalked up to BitGo’s crypto reserves, but suggested the portion was not insignificant.

Mike Belshe, the cofounder of BitGo, did not respond to a request for comment on the specifics of the purchase price. Galaxy Digital, when asked for comment, referred Decrypt to the company’s quarterly filings.

Several of the Galaxy filings note it “will issue incremental shares of its common stock to BitGo’s shareholders in exchange for BitGo’s net digital assets at close” (emphasis added), which appears to confirm that the publicized purchase price includes BitGo’s crypto holdings.

Without BitGo’s crypto stash, the value of BitGo as a company would likely be well under $1 billion. But the deal could still prove fruitful for Galaxy: acquiring BitGo will give it a reliable stream of revenue from its custody clients, who number around 300, and also let it bring on hundreds of people, including engineers, who are well-versed in blockchain—a key strategic asset at a time when companies are in a war for crypto talent.

Meanwhile, Galaxy says the delay in closing the acquisition is related to an ongoing wait for the company to receive approval to list on the Nasdaq stock exchange—an event that will trigger an obligation to issue new shares to BitGo.

Galaxy is currently listed on the Toronto Stock Exchange. While it had expected to join the Nasdaq last year, Galaxy—like other crypto firms seeking to access public markets in the U.S.—has had to contend with regulatory difficulties in the form of SEC Chairman Gary Gensler, who has adopted a sweeping hostility to crypto.

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