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Two cryptocurrency trading companies are merging, and in a rare twist, so are their tokens.
Voyager Digital, a publicly traded digital asset broker with offices in New York, has agreed to buy LGO, a French crypto exchange serving primarily institutional investors, while Voyager expands into Europe.
The transaction requires regulatory approval, which the parties said they expect to receive later this year along with the token exchange. The value of the deal will depend on the value of Voyager’s shares and the companies’ tokens at close. At current prices it would be in the low seven digits.
As such, this deal is dwarfed by this year’s successful cryptocurrency M&A deals such as Binance’s acquisition of CoinMarketCap, estimated to be worth $ 400 million, and FTX’s $ 150 million deal. to acquire Blockfolio.
Read More: “They Have Users”: Binance CEO Explains Why He Purchased CoinMarketCap
What makes this deal unusual is that the two companies’ utility tokens, VGX and LGO, will be exchanged for newly minted tokens with decentralized finance (DeFi) functions such as community governance and staking at an initial interest rate of the 7%.
“We think this is really bringing old-school mergers and acquisitions to the token world, which has never been done before,” Steve Ehrlich, co-founder and CEO of Voyager, told CoinDesk.
Upon completion, Voyager, which is listed on the Canadian Securities Exchange, will issue one million shares for the acquisition and will operate in the European retail market by registering LGO’s Virtual Asset Service Provider with the French financial markets regulator ( AMF). All activities will be conducted under the Voyager brand and LGO will discontinue its institutional services on October 31st. Voyager shares closed at C $ 0.67 (US $ 0.51) on Wednesday.
Learn more: Voyager pays interest on DeFi tokens to get brokerage clients
Hugo Renaudin, co-founder and chief executive of LGO, told CoinDesk that the French company closed the deal after deciding to shift its focus from institutional clients to increasing value for its token holders.
“The key decision maker is what will bring the most value to our tokens,” said Renaudin. “So we have this token. We have token holders and they are mostly retail clients.
LGO launched an Initial Coin Offering (ICO) in February 2018, according to its website, which raised 3,600 bitcoins (worth around $ 36 million at the time). The company’s white paper shows that 60% of the tokens were distributed through a pre-sale process, while 20% of the supply went to LGO’s founders and consultants.
At its peak in April 2018, the market cap of the LGO token was nearly $ 40 million, according to data from CoinMarketCap. On Wednesday, that value was calculated at $ 1.5 million.
Renaudin told CoinDesk that the company’s other option would focus on better serving its institutional clients, meaning its spot exchange would have to provide new and exotic derivatives. After thinking, he said the team had decided to focus on retail clients instead.
The merger comes during a time of regulatory crackdown on crypto derivatives trading around the world. Popular crypto derivatives exchange BitMEX has been accused by the US Commodity Futures Trading Commission (CFTC) of facilitating unregistered trading activities, while in the UK, the Financial Conduct Authority (FCA) has banned derivatives cryptographic systems for retail consumers.
This is not the first acquisition by Voyager, which went public in early 2019 in a reverse merger with the shell of a Canadian mining exploration company. Previously, it acquired the wallet startup Ethos.io for around $ 4 million.
Read more: Voyager CEO says revenue growth accelerates 8x as DeFi trading increases
Voyager’s revenue in the final fiscal quarter, which ended September 30, increased to approximately $ 2 million, compared to $ 1.1 million during the fiscal year ended June.
“We are becoming the financial services company of the future, which means that I will be looking at acquisitions that can add products, customer assets to the platform or tokens, and other communities that can augment what we are trying to do,” Ehrlich said. “And by adding these pieces together we will do it organically or through multiple acquisitions.”
Correction (October 22): “Fixed misspellings of ‘Ehrlich.’“
