Introducing "Alastor Weekly"
Introducing "Alastor Weekly"
Weekly round-up of strategic activity from a couple of former TradFi bankers
Introducing The Alastor Weekly, a weekly newsletter recapping key strategic events across Web3. You may ask, what are strategic events? They are things like M&A, financings, restructurings, governance-sagas. Anything that is large and value-defining. We will being focusing on strategic events within Web3 that have a financial bend to them.
Our other publication, Alastor, is focused on providing deep-dive insight and analysis on specific events / topics in Web3. Both publications will approach Web3 from the perspective of bridging our experience in TradFi as investment bankers to the new Web3 primitives that are emerging across crypto and DeFi.
Ok, let’s dive in…
1. Uniswap acquires Genie
Last week we witnessed Uniswap putting on their M&A caps and acquiring NFT Marketplace aggregator, Genie. Our in-depth thoughts are here but these are the spark notes:
Transaction was likely quite small and can probably be viewed more as an “acqui-hire”
The acquisition was done by Uniswap Labs, the VC-backed centralized entity, not the Uniswap Protocol, which is governed as a DAO
Competition in the NFT space is heating up. OpenSea remains the 800-pound gorilla in the room, but other large, well-capitalized players are going after the opportunity. Who will be the first to give OpenSea a run for their money?
What does this mean for Uniswap Labs and its monetization plans? Remember, if the “fee switch” is turned on, that value will accrue to holders of the UNI token. So Uniswap Labs is looking for ways to monetize the Uniswap Interface, and this is potentially a big first step
2. eBay acquires Known Origin
It was a busy week in NFT land. Not only did Uniswap announce its splashy deal with Genie, but so did eBay with its acquisition of Known Origin. Financial terms of the deal were not disclosed
While Genie and Gem were both acquired by pure-play crypto companies (Uniswap & OpenSea), eBay is most definitely not a pure-play crypto company (although they had started to allow NFT sales on its platform). Will other Web2 marketplaces use M&A to get into the NFT space? Probably.
eBay is generally not viewed as a seller-friendly marketplace. Given that this ethos is the exact-opposite of the intentions of the NFT space, I am curious to see how eBay approaches this. If they try to impose their Web2 frameworks on Known Origins, this will almost certainly be value-destructive acquisition
3. FTX acquires Embed
The last of our significant M&A deals comes from one of the usual suspects in crypto M&A, FTX. This time they acquired Embed, whose specialty is providing white-label brokerage services and APIs to BDs and RIAs.
Why did they do this? To built out their FTX Stocks business. Outside of crypto and NFTs, FTX wants to provide a comprehensive trading applications that cuts across all asset classes.
FTX has been one of the most active acquirers in the crypto space. Why? One, they’ve raised a ton of money so they can afford it. Two, they have highly-valued equity that they can use to finance these deals if they choose to use it. That contrasts directly with Coinbase whose stock price has gotten destroyed the last six months.
Most importantly, they have a very strong and profitable core business. M&A (or really any business expansion) is like the second or third floor of a house, you can’t do it until you have the foundation place.
4. SBF: Altruist or opportunist?
As fallout from the 3AC implosion continues to spread, two new victims emerged: Voyager and BlockFi. Things were looking dire for both companies, until, guess who, SBF swept in.
Voyager signed a term sheet with Alameda for a revolver for $200MM USD and 15,000 BTC.
On the other side of the ballpark, BlockFi signed a term sheet with FTX for a $250MM revolver
However, we need to hold the phone on BlockFi, as Morgan Creek is trying to pull together a last-ditch efforts to avoid this option. FTX’s term sheet gives the company the ability to purchase the equity of BlockFi for basically nothing, wiping out the equity holders (Morgan Creek being one of them). Why would BlockFi agree to this? Because FTX was the only lender that was willing to subordinate their loan to the customer deposits. Ah, moral dilemmas. Screw the equity holders or screw the customers. How fucked is BlockFi? Check out this thread:
SBF has emerged as the white knight of the crypto industry, acting as a lender of last resort for liquidity-plagued companies. Is he doing it to save the crypto industry? Or is he crypto’s Littlefinger? Probably a bit of both.
5. Vampire squid to the rescue
If SBF operates with the benefit of the doubt from the crypto industry, on the other side of the spectrum is everyone’s favorite villain: Goldman Sachs.
In another episode of 3AC blowing up a bunch of others, the vultures are starting to circle around Celsius.
To be clear, Goldman is not planning to purchase the assets of Celsius. They are instead fundraising to set up a deal for others to acquire the assets. Goldman would clip a typical banking fee as a result and leave the ownership and management of the assets to others.
Celsius has likely hired restructuring lawyers and bankers as it appears to be heading towards Chapter 11 bankruptcy. Calling all crypto restructuring experts, this won’t be the last one.
6. Controversy at Solend
How decentralized is DeFi? It’s a fair question after watching the Solend debacle unfold. Quick recap:
Large whale deposited 5.7MM SOL into Solend at a price of $22.30 which is about $160MM worth of SOL. With that deposited, the whale withdrew 108MM worth of stables
However as markets have trended down, that position was coming very close to being liquidated. A liquidation of this scale has the potential to cascade and blow up the protocol. Solend attempted to contact the whale but got no response
How did Solend respond? They proposed a DAO vote to provide emergency powers to Solend Labs to take over the wallet of the whale. The vote passed overwhelmingly. However, 90% of the vote came from one wallet
Low and behold, as CT erupted in outrage, Solend invalidated the vote and extended the voting period to one day. In that one day period, they were able to get in contact with the whale who spread their holdings across multiple lenders
So to answer the question… How truly decentralized is DeFi? Not very. Not only did Solend Labs propose ‘emergency powers’ to take over the whale’s holdings, but one voter held enough tokens to control the vote, and after all of that, Solend invalidated the passed proposal. Sigh.
Good thread on the situation here:
About the Authors
Sam Bronstein and Jordan Stastny were previously M&A advisors at Qatalyst Partners. While at Qatalyst, they advised on over $150Bn of M&A volume across some of the most significant deals in the technology industry, including the sales of Slack, LinkedIn, Mailchimp, Qualtrics, Glassdoor, and others. They founded Alastor to provide expert level advice on M&A on corporate finance to the crypto community.
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