Binance buys $100 million Circle stake at 14% discount

Binance bought $100 million of stock in Circle Internet Group, the company behind the USDC stablecoin, according to a filing Circle made with the US Securities and Exchange Commission on Tuesday. Circle issued Binance 1,237,011 Class A shares at $80.84 each under an agreement signed on September 17. The price was about 14% below Circle's Monday closing price. The shares were sold privately and were exempt from SEC registration. Binance cannot sell the shares for two years or hedge the position with offsetting trades during that period. The lockup can end earlier if Binance leaves the commercial part of the deal under conditions set out in the filing. Either company can terminate the agreement if specified events occur. Binance retains full voting rights throughout the lockup. The companies also signed a five-year commercial agreement under which Binance will promote USDC through Circle's Modular Smart Contract Wallet. The software allows an app or exchange to hold and move digital dollars for a user without the user managing private keys. Circle will pay Binance a monthly incentive fee calculated as a percentage of the USDC held in that wallet infrastructure. The filing does not disclose the percentage. Two days before the agreement was signed, the CLARITY Act stalled in the Senate and Circle shares fell 11% in one session, according to an earlier BeInCrypto report. The bill would establish which US regulator oversees different digital assets. Circle shares later recovered. They closed at $94.49 on Monday, up 2.95% that day, and traded at $95.50 in Tuesday pre-market trading. The shares were up 18.53% over the past quarter, while their relative strength reading was 56.2, within the stated neutral range of 30 to 70. Circle had a market value near $25.8 billion and traded at about 19 times earnings. It reported $701.3 million in revenue in the latest quarter and $2.75 billion over the past year. Circle already shares stablecoin economics with Coinbase, and distribution costs are the main drag on what stablecoin reserves earn. USDC was the sixth-largest crypto asset with a market value of $74.6 billion, while the token traded at $0.9998. The next quarterly report should show whether the new fee increases Circle's distribution costs or whether the additional USDC balances cover them.