Circle IPO Controversy: Financial Giants Gain Large Allocations, Encryption Native Institutions Are Ignored

The Chief Investment Officer of a well-known encryption asset management company recently expressed sharp views on the Circle IPO allocation issue. As the issuer of the USDC stablecoin, Circle's IPO should have been an important milestone for the encryption industry moving towards mainstream finance; however, the issuance process has sparked widespread controversy within the industry.

The investment officer strongly criticized Circle's behavior of favoring traditional financial institutions and ignoring encryption native participants in the IPO allocation from the perspective of an eyewitness, and used this to explore why the core concept of "aligned interests" in the encryption industry is often deviated from in the traditional IPO system.

Circle completed its initial public offering last week, pricing at $31 per share, above the initial expected range of $24 to $26. The closing price on the first day was $84, and by the end of the week, the stock price had exceeded $107. Investment banks clearly priced this IPO too low, which also reflects Wall Street's growing enthusiasm for investment in encryption assets, especially stablecoins.

Reasons to be Bullish on CRCL:

• This is currently the only listed investment target focused on the growth of stablecoins.
• The stablecoin market is expected to grow to over $1 trillion in managed assets.
• USDC currently has an asset management scale of 60 billion USD, with an annual growth rate of 91%.

Reasons for Bearish Outlook on CRCL:

• A business model that completely relies on interest rates, with all income coming from interest income.
• Rely on a certain trading platform as the issuance agent, which takes about half of the interest revenue.
• Relying on a certain asset management company, which collaborates with multiple banks that are trying to enter the stablecoin market.
• There has been almost no income and profit growth in the past 3 and a half years ( although EBITDA has increased by 60% year-on-year )
• The current stock price valuation of 107 dollars is relatively high: Approximately 30 times gross profit Approximately 110 times return Adjusted EBITDA is approximately 59 times ( annualized for the first quarter of 2025 )

Criticism of Circle's IPO Allocation

The investment officer stated that Circle's choice to allocate shares to traditional financial institutions rather than encryption-native funds during the IPO allocation process is a huge mistake. After communicating with several crypto funds and companies, they found that these early users and promoters of USDC either received very little allocation or did not receive any allocation at all. This further confirms the fact that Circle favors traditional Wall Street financial institutions while neglecting encryption-native supporters.

He believes that Circle's actions completely deviate from the spirit of encryption. Circle could have used the IPO to provide returns for long-term supportive clients, thereby enhancing their return rates and asset management scales, and this funding would ultimately benefit the industry. However, Circle generously allocated IPO shares to mutual funds and hedge funds in traditional finance. These institutions likely haven't even finished reading the prospectus, do not have digital wallets, and certainly do not truly use Circle's products.

Response to Some Doubts

In response to the skepticism about "this is like wanting to take advantage of airdrops," the investment officer stated that they agree with the idea that clients should be rewarded, but unlike airdrops, they are willing to purchase stocks at the same price as others.

Regarding the statement "we should blame the underwriters", he explained that as the issuer, Circle has the final decision-making power over the allocation.

Regarding the statement "the IPO was oversubscribed by 25 times", he pointed out that this might just be a "cosmetic dance" on the final data, which cannot reflect actual fairness. Early buyers reported their genuine subscription demands before the entire order book was established, and they should have received their rightful shares based on demand, but were completely marginalized in this operation.

The investment officer stated that it is still unclear whether Circle's IPO allocation will affect its future and the adoption of USDC. However, they are very much looking forward to the upcoming 13F documents to see which investors Circle has chosen to share in their growth dividends.