Wow:

The bitcoin treasury strategy pioneered by billionaire Michael Saylor’s MicroStrategy, which now calls itself Strategy, remains dominant: more than 70 public companies around the world currently hold over $67 billion worth of the asset. But the sheer velocity of capital deployment for crypto treasuries at large is jaw-dropping. Since April, more than 30 public companies have announced plans to adopt similar strategies, targeting about $19 billion in capital raises, according to Elliot Chun of Architect Partners, a Palo Alto-based financial advisory firm.

That’s from a Forbes article published earlier this month – so the number is higher now, and it’s hard to visit any news site that is even tangentially related to business or finance and not run into an article about the “crypto treasury” craze. (I say “crypto” here because in the time since that Forbes article was written, there have been deals that focused on currencies other than bitcoin.) This newsletter from Bloomberg’s Matt Levine explains how the “path to public” for the crypto entrepreneurs involves – what else? – SPACs:

…we talk a lot around here about small public companies that get gobbled up by crypto entrepreneurs so they can pivot to being crypto treasury companies. But this is inefficient and haphazard: If you want to take a pot of crypto public on the stock exchange, why should you have to find some defunct public biotech company, negotiate with its executives, strike a deal, lay off the biotech researchers, etc.? Why shouldn’t an investment bank just be in the business of supplying pristine public listings, so instead of pivoting some biotech/toy/liquor/whatever company to crypto, you can just start with a blank slate?

Of course banks are in this business. This business — the business of supplying a publicly listed shell company — is the SPAC business (special purpose acquisition companies).

If you’re working on these deals, you may be having déjà vu from the SPAC heyday. Lucky you! Of course, there may be a couple differences this time around. For one, you’ll need to consider the SPAC disclosure rules that went into effect last summer – with the aim to make SPAC/de-SPAC deals more akin to traditional IPOs. But there are a couple of potentially mitigating factors there:

– Some deal teams had baked in some of these requirements already as a matter of practice.

– SEC leadership has changed! I haven’t heard too much specifically on how the Staff proceeds on SPAC-related reviews under the new regime, but with the crypto angle, it wouldn’t be surprising if this falls under the directive in yesterday’s Working Group Report to encourage SEC registrants to “engage in innovative new business models.”

The other thing that adds new wrinkles is that for many of the “crypto treasury” companies, in addition to not being a traditional business in the first place, this isn’t a buy & hold strategy for the crypto. This Bloomberg article explains how the new players are “chasing yield.” That sounds complicated to explain to some investors and various regulators – maybe even to some of the company’s directors! The companies are including a whole new category of risk factors, which I imagine were fun for the first few trailblazers to draft and continue to require careful reading for each company’s circumstances.

Lastly, some people are questioning how long the “crypto treasury / SPAC” play can last. “How is the market not already saturated?” I am not sure whether that’s a distinguishing feature of this new twist, or something that makes it just like the last round, where very similar questions seemed to spark a level of FOMO that only prolonged the trend.

– Liz Dunshee