425: FTAC Emerald Acquisition Corp. to Merge with Fold, Inc., Creating Publicly Traded Bitcoin Financial Services Platform

FTAC Emerald Acquisition Corp. and Fold, Inc. have announced a merger agreement to create a publicly traded bitcoin financial services platform.

Summary

• FTAC Emerald Acquisition Corp. (FTAC Emerald) and Fold, Inc. (Fold) have entered into a merger agreement, where FTAC Emerald's wholly-owned subsidiary will merge with Fold, making Fold a wholly-owned subsidiary of FTAC Emerald.
• The merger aims to create a publicly traded bitcoin financial services company.
• Fold shareholders will roll over 100% of their equity and own approximately 71.2% of the combined company.
• The implied pre-money equity value of Fold is $365 million.
• The pro forma equity value of the combined entity is approximately $494 million.
• The combined company is expected to have approximately $113 million in cash, including $80 million in Bitcoin holdings.
• Fold is a gateway to Bitcoin-based financial services, offering products like Bitcoin rewards cards, insured Bitcoin custody, and debit cards with Bitcoin rewards.
• Fold has over 575,000 accounts and has distributed over $40 million in Bitcoin rewards.
• Fold's strategy includes accumulating Bitcoin in its corporate treasury.
• Fold expects user growth to increase over 2024 and 2025, in line with the Bitcoin halving cycle.
• Fold projects revenue of $24.0 million in 2024 and $61.6 million in 2025.
• The transaction includes a potential adjustment to the pre-money equity value based on Bitcoin price movement prior to closing.

Sentiment

Score: 7

Explanation: The document presents a positive outlook on the merger between FTAC Emerald and Fold, highlighting the potential for growth and value creation in the Bitcoin financial services sector. However, it also acknowledges the risks and uncertainties associated with the transaction.

Positives

• Fold is positioned to be the first publicly traded pure-play Bitcoin financial services company.
• Fold has a rapidly growing user base with over 575,000 accounts.
• Fold has a strong Bitcoin treasury strategy, holding over 1,000 Bitcoin.
• Fold offers a diverse range of Bitcoin-based financial products, including rewards cards, custody solutions, and debit cards.
• Fold has a high customer lifetime value (LTV) to customer acquisition cost (CAC) ratio.
• Fold is expanding its product roadmap to include credit cards, loans, and business accounts.
• Fold is diversifying its revenue streams across banking & payments, custody & trading, and credit & loans.
• Fold's management team has experience in payments, blockchain, and venture capital.

Negatives

• The transaction is subject to risks and uncertainties, including regulatory approvals and stockholder approval.
• Fold's revenue growth has been impacted by strategic changes in sales channels and marketing efforts.
• The projections for 2025 are goals and are forward-looking, actual results will vary, and those variations may be material.

Risks

• The proposed transaction may not be completed in a timely manner or at all.
• Failure to obtain the necessary approvals from FTAC Emerald's stockholders or regulatory bodies could prevent the merger.
• The anticipated benefits of the proposed transaction may not be realized.
• The announcement or pendency of the proposed transaction could negatively impact Fold's business relationships and performance.
• Legal proceedings related to the business combination agreement could arise.
• Maintaining the listing of FTAC Emerald's securities on the NASDAQ is not guaranteed.
• The proposed transaction may not generate the expected net proceeds for the combined company.
• Downturns, new entrants, and a changing regulatory landscape in the competitive industry in which Fold operates could pose challenges.
• The ability to implement business plans and realize additional opportunities after the completion of the proposed transaction is uncertain.
• The risk of downturns, new entrants and a changing regulatory landscape in the highly competitive industry in which Fold operates.

Future Outlook

Fold expects user growth to increase over 2024 & 2025, in line with the Bitcoin halving cycle and new products such as credit cards, insurance and yield on assets under custody are expected to unlock opportunities for cross selling.

Industry Context

This announcement reflects the growing interest in integrating Bitcoin into mainstream financial services. The merger aims to capitalize on the increasing adoption of Bitcoin and provide a publicly traded vehicle for investors to gain exposure to the cryptocurrency market.

Comparison to Industry Standards

• MicroStrategy, a company known for holding a significant amount of Bitcoin on its balance sheet, has seen its stock price outperform Bitcoin by approximately 1.6x over the last 5 years.
• Coinbase, a leading cryptocurrency exchange, has demonstrated significant user growth and revenue generation in the cryptocurrency space.
• Fold's strategy of accumulating Bitcoin in its treasury is similar to that of other companies seeking to hedge against inflation and diversify their asset base.

Stakeholder Impact

• Shareholders of FTAC Emerald will have the opportunity to invest in a publicly traded Bitcoin financial services company.
• Fold customers will benefit from expanded financial product offerings and increased access to Bitcoin investment opportunities.
• The merger could create new job opportunities within the combined company.
• The transaction could contribute to the broader adoption of Bitcoin and the growth of the cryptocurrency ecosystem.

Next Steps

• FTAC Emerald stockholders will vote on the proposed transaction.
• The parties will seek to obtain necessary regulatory approvals.
• The merger is expected to close, subject to the satisfaction of customary closing conditions.
• Fold plans to launch new products, including credit cards, insurance, and yield on assets under custody.

Key Dates