This month's stock price correction and cryptocrash will not stop one of Canada's most hotly anticipated digital currency financing transactions from going to market.
Underwriters of a deal to take newly formed Ethereum Capital public will proceed with a $45-million private placement, selling 18 million subscription receipts at $2.50 apiece – down from an original target of 20 million receipts and $50-million in gross proceeds, sources familiar with the deal say. Those receipts will be exchangeable into shares of publicly listed Movit Media when Ethereum completes a reverse takeover of the B.C.-based TSX Venture Exchange shell company, likely by early April.
Investment dealers CIBC and Canaccord Genuity quietly priced the Ethereum offering last Friday following the rockiest week on the public markets in two years – and a swoon in prices of virtual currencies including Bitcoin and Ether – content that they will now be able to close the receipts offering later this month, rather than pull it, the fate of several IPOs last week.
That slight reduction on the deal size may not seem like much of a retreat given the recent volatile markets. But initial demand for the Ethereum offering was so strong that within days after the private placement was unveiled two weeks ago, the deal team was considering up-sizing the offering by 50 to 100 per cent. Much of those commitments were dialled back by nervous institutional investors in the face of uncertain markets. Sources say the underwriters had enough orders to fill out the $50-million book but wanted to ensure there was still enough market support for the offering after it closed and began trading.
Ethereum is the co-creation of pension giant OMERS along with its minority-owned fund management firm Purpose Investment, an OMERS-backed crypto startup called Citizen Hex that buys and sells Ethereum digital tokens and L4 Ventures, a Toronto blockchain incubator advised by Ethereum inventor Vitalik Buterin. OMERS is not investing in Ethereum Capital but Purpose is, and Purpose's CEO Som Seif will serve as Etherum chairman. The board features several top names in the young North American cryptocurrency technology and investment space including: Citizen Hex CEO Roberts; Joey Krug, co-chief investment officer of early San Francisco blockchain investment fund Pantera Capital; Vancouver venture capitalist Boris Wertz of Version One Ventures, an investor in cryptocurrency exchange Coinbase; L4 co-founder Liam Horne; and Michael Conn, managing partner of Quail Creek Partners, a Los Angeles-area adviser to hedge funds, fintech and blockchain firms, who becomes Ethereum Capital's CEO. OMERS Ventures CEO John Ruffolo will also sit on the board.
Ethereum is a blockchain platform used for applications and facilitating transactions across the internet without an intermediary. Ether is the system's unit of payment. Ethereum has emerged as the technology of choice for digital token creators, fuelling the boom for initial coin offerings. The system has also been given credibility by the Enterprise Ethereum Alliance, a group of blockchain supporters including Mastercard, Microsoft, J.P. Morgan and Bank of Nova Scotia.
Ethereum Capital's strategy is to buy control stakes in Ethereum-based businesses, but since such entities are still in a nascent stage, the fund will also invest in the Ether currency itself. Mr. Ruffolo said in a recent interview the bet is "not currency speculation" but rather on the "underlying entrepreneurial businesses" that will grow on the Ethereum platform.