“They designed a very clever mechanism to hoover up as much capital as possible,” said Richard Burton, San Francisco-based founder of Balance.io, a blockchain company that designs applications for open source financial products. “Bitcoin was started on a shoestring and Ethereum raised just a few million dollars, which goes to show you don’t need anything like the money Block.one raised to launch and scale a successful network. It should be beholden on them to explain why they needed that much and what they are doing with it.”
The buyback of 10 percent of its stock values the company at about $2.3 billion, up from about a $40 million valuation in the 2017 seed round. The repurchase price of about $1,500 per share, compared to the $22.50 investors paid in that fundraising. (For context, Uber was valued at about $5 million in a 2010 seed funding and now has a market capitalization of about $70 billion after its initial public offering.)
Thiel, Bacon and Howard bought into the company in July 2018. Bacon and Howard declined to comment on whether they would tender their shares in the buyback. Thiel didn’t respond to multiple messages.
An earlier backer, fintech investor Christian Angermayer, doesn’t intend to sell any shares. “Block.one is one of the most promising and best positioned companies in the blockchain industry, and its success story is just beginning,” he said in e-mailed comments. In a statement Tuesday, Novogratz cited “substantial outperformance” by Block.one for the decision to sell most of his shares. His investment firm reported a 123 percent return and proceeds of $71.2 million in the transaction.
The buyback offer comes less than a year after a first stock repurchase offer in which Block.one sought to acquire 15% of its outstanding shares at $1,200 each. A total of 13.8% was tendered, equating to around $300 million.
Blumer said in a November interview with Bloomberg television that “too much transparency into everything that we are doing on an ongoing basis can actually take away a lot of the competitive advantage when we’re trying to put out new types of technology.”
Indeed, the buyback could make an opaque company less transparent since it will have fewer people to share information with.
“A private buyback of this sort signals to me that the company believes that there are few growth opportunities in sight, or badly wants to consolidate ownership and avoid outside scrutiny,” said Nic Carter, a partner who focuses on blockchain at investment firm Castle Island Ventures in Boston. It has not invested in Block.One or EOS tokens.
This article was provided by Bloomberg News.