Tether's $458.7M Bitcoin Bet Prepares New Player to Challenge Bitcoin's Corporate Giants

The stablecoin giant's latest move accelerates a high-stakes merger and positions a new player to challenge Bitcoin's corporate giants. By Fazal Ul Vahab.

Stablecoin behemoth Tether has made a massive new Bitcoin purchase on behalf of Twenty One Capital, rapidly propelling the SPAC towards a merger with Cantor Equity Partners.

According to a recent SEC filing, Tether scooped up 4,812 BTC on May 9 at an average price of $95,319. The purchase price was disclosed in a Form 4 filing, which also stated that the entire holding was sold on the same day.

The bulk purchase, executed at the height of Bitcoin’s recent bull run, signals substantial confidence from Tether in Twenty One’s future endeavors.

Following the purchase, Twenty One’s BTC reserves are poised to swell to 36,312, making it the third-largest institutional Bitcoin holder.

The startup is currently aiming to launch with 42,000 BTC in total, with contributions also expected from SoftBank and Bitfinex.

To date, Tether has announced plans to inject 23,950 BTC, SoftBank will contribute 10,500 BTC, and Bitfinex will add 7,000 BTC. These BTC holdings will be converted into equity at a price of $10 per share.

Earlier this year, reports emerged that Twenty One was in the final stages of securing a merger with Cantor.

The SPAC is planning to trade on the New York Stock Exchange under the ticker “XXI.”

The merger, which is still pending regulatory approval, will see Cantor contribute its entire business to the combination.

Cantor is a well-known financial services firm that provides a diverse range of products and services, including investment banking, treasury management, and brokerage services. The firm is also a significant player in the SPAC market, having sponsored several successful SPACs in recent years.

After striking a deal with Cantor to go public last year, Twenty advised investors to buy its shares at a price of $25 each.

However, after several price increases, the final share price was set at $20, in anticipation of a smaller-than-expected SPAC.

The SPAC’s structure is unique in that it will not generate any revenue or earnings. Instead, it will focus solely on accumulating Bitcoin and maximizing shareholder returns through cryptocurrency services.

This strategy is designed to appeal to investors who are seeking high-yielding investments in the rapidly growing cryptocurrency market.

Twenty’s SPAC is also noteworthy for its use of preferred shares to fund its Bitcoin purchases.

Typically, SPACs issue common shares to raise capital, but Twenty is taking a different approach by structuring a Series A preferred stock offering to investors.

This strategy is significant because it could factor into the Paycheck Protection Program (PPP) loan status of the SPAC.

To qualify for PPP loans, a company must have less than 500 employees and be able to demonstrate that it has been materially affected by the coronavirus pandemic.

However, the structure of the SPAC could present a challenge in meeting these criteria.

Despite striking a deal with Cantor in March, shares of the investment firm began surging in May.

The move came after rumors of a pending merger with Twenty One began circulating, encircling a report from the New York Post that the SPAC was planning to invest $600 million into Binance.

It’s important to note that neither Binance nor Twenty One responded to requests for comment regarding the rumor.

Cantor’s stock price had already been climbing rapidly since the start of the year, fueled by a strong performance by its core businesses and optimism about the SPAC market.

Shares of Cantor closed on Monday at $29.84. But in May, the stock peaked at $59.73, before sliding as low as $16.33.

After Tether’s recent purchase on behalf of Twenty One was announced, shares of Cantor rose by 5.2% in extended trading.

The SPAC is still in the process of raising the remaining funds needed to complete its merger with Cantor.

According to a recent Form 8K filing, the firm has already secured $585 million, which includes $385 million in debt from Triple Point Venture Growth (TPVG).

Among the investors who have already contributed to the SPAC is Bitfinex, which announced in December that it would be investing $700 million.

The contribution from Bitfinex, the parent company of Tether, will see the cryptocurrency exchange transfer 7,000 BTC to Twenty One in exchange for a 10% stake in the SPAC.

At the time of the investment, Bitfinex CEO Wolfgang Pernhawi stated that the firm was a strong believer in Twenty One’s vision and was excited to be a part of the company’s journey.

In total, Twenty One is aiming to raise around $1 billion to invest in Bitcoin and other cryptocurrency services.