Circle, a prominent stablecoin issuer, is making strides towards going public, but recent reports suggest that the company is also considering a potential sale to either Coinbase or Ripple. Fortune reported on May 19 that informal acquisition talks are underway, with both Coinbase and Ripple being potential suitors for Circle.
While Circle filed for an initial public offering (IPO) last April with a target valuation of $5 billion, the possibility of an acquisition could change the company’s trajectory. Sources familiar with the matter revealed that discussions are still in the early stages, and no formal offers have been made yet. However, industry insiders believe that Coinbase is the most likely acquirer, given its close ties to Circle’s USDC stablecoin ecosystem.
The relationship between Coinbase and Circle dates back to 2018 when they co-governed the USDC stablecoin through the Centre Consortium. However, in 2023, Circle gained full control of USDC’s governance, while Coinbase received an equity stake and a revenue-sharing agreement. The S-1 filing from Circle indicates that revenue from USDC reserves is split evenly between the two companies, but when USDC is held on Coinbase’s platform, the exchange receives all revenue.
The ongoing discussions have highlighted the interdependence between Coinbase and Circle, with some insiders viewing the companies as almost inseparable. A banker familiar with the talks mentioned that if Coinbase were to show interest in acquiring Circle, the stablecoin issuer would agree to a sale without hesitation.
On the other hand, Ripple Labs also made an offer to acquire Circle for $4-5 billion, but the bid was turned down as being too low. Ripple’s offer reportedly included a combination of cash and XRP, the digital asset native to the Ripple network. Despite Ripple’s substantial XRP holdings, industry experts believe that Coinbase is better positioned to acquire Circle due to its financial reserves and access to the public market.
Coinbase, which reported $8 billion in cash reserves in its last quarterly filing, has been active in acquisitions, with recent purchases including Deribit and Spindle. CEO Brian Armstrong has expressed a strategic approach to M&A opportunities, emphasizing the importance of thoughtful integration.
While Circle is currently focused on its plans to go public, the evolving nature of the situation suggests that a sale to Coinbase or Ripple remains a possibility. As one private equity executive noted, the landscape is changing rapidly, and decisions may shift on a weekly basis.
In conclusion, the potential acquisition of Circle by Coinbase or Ripple could reshape the stablecoin landscape and further solidify the ties between these industry giants. The coming weeks will be crucial in determining the path that Circle ultimately chooses to take.