The buzz that often surrounds cryptocurrencies and blank-check companies is sounding more like a buzz-saw for at least one business that’s trying to ride both trends.
MoneyLion Inc. has plunged 30% just days after the digital bank and crypto trading platform debuted this month by merging with a special-purpose acquisition company. This may not bode well for other crypto marketplaces such as eToro USA and Bakkt, whose pending deals with SPAC partners have been delayed amid a crackdown by regulators in the U.S., Europe and China on SPACs and digital currencies.
The dismal 28% slide of the broad SPAC sector from its February peak doesn’t help matters. For some digital currency fans, though, the main problem is that these crypto-SPAC hybrids are simply too far removed from the real action.
“People like to own the coins,” says Gurgavin Chandhoke, an Ontario-based individual investor who trades in both SPACs and digital currency. “If I wanted to invest in Bitcoin, I’d rather own the underlying asset.”
MoneyLion is a 2013 startup that offers a full slate of traditional banking services. Just days before its Sept. 22 merger with Fusion Acquisition Corp. was completed -- using Merrill Lynch’s old ML ticker -- MoneyLion added the ability to buy and sell Bitcoin and Ethereum on its app, with more such capabilities on the way. This didn’t move the shares, nor did an accompanying Bitcoin lottery giveaway for new customers that included a $1 million prize pool.
Shares of MoneyLion dropped as much as 16% on Wednesday, adding to a 7.5% decline on Tuesday when markets swooned. Representatives for the New York-based company declined to comment.
SPACs tied to larger shops with even more focus on crypto, such as Israel-based eToro and Atlanta-based Bakkt, haven’t gained much traction, either. Betsy Cohen’s Fintech Acquisition Corp. V blank-check company is scheduled to purchase eToro, while VPC Impact Acquisition Holdings Corp. is pursuing Bakkt. Both of those SPACs are trading just above their $10 IPO.
At least two other similar mergers are pending, with similarly lukewarm stock reactions. Far Peak Acquisition Corp. is targeting the startup exchange platform known as Bullish, and Concord Acquisition Corp. plans to tie up with Circle Internet Financial.
Both eToro and Bakkt earn fees mainly for handling cryptocurrency transactions, rather than buying and holding coins. EToro says “crypto is going mainstream,” with more than 60% of commissions generated in the first half of 2021 via crypto assets.
Bakkt’s initial backers included Intercontinental Exchange, which runs the New York Stock Exchange, and Microsoft Corp. The company points to its “diverse” revenue streams, making money from crypto activity as well as fees from converting airline and travel reward points into cash.
The public debuts for Bakkt and eToro have been pushed to the fourth quarter amid the tougher regulatory scrutiny. EToro said it’s working closely with the SEC in the final stages of getting approval, with another 20 days needed after that for a shareholder vote and then a few more days to finalize matters. Bakkt didn’t respond to messages seeking comment.
Double-Whammy
“They’re getting hit with a double-whammy of focus,” said Kristi Marvin, chief executive of research firm SPAC Insider. “SPACs are under the microscope, but so is crypto. So imagine being a crypto-SPAC.”
The average time from announcement to shareholder vote for the approximately 90 SPAC deals announced this year was 5.2 months, according to Marvin. The Bakkt and eToro deals have already taken longer than that. MoneyLion’s deal took about two months more than the average.
The silver lining is that any regulatory hardship they endure now should leave those businesses better positioned than any rivals that try to follow, said Mark Yusko, chief of Morgan Creek Capital Management.
“In the interim, the more compliant they are, the better,” Yusko said. “Every time the price of Bitcoin moves, people trade and they make a little money off that.” As for latecomers who try to rush through the regulatory process, “my guess is they won’t fare well.”
