425: Galaxy Digital Holdings Proposes Reorganization and Domestication to Delaware

Galaxy Digital Holdings Ltd. is seeking shareholder approval for a reorganization plan to redomicile to Delaware, aiming to normalize its corporate structure and pursue a Nasdaq listing.

Summary

• Galaxy Digital Holdings Ltd. (GDHL) is proposing a reorganization and domestication, including redomiciling from the Cayman Islands to Delaware.
• The reorganization aims to normalize GDHL's corporate and capital structure, aligning stakeholder interests and pursuing a Nasdaq listing.
• A special meeting of shareholders is scheduled for May 9, 2025, to vote on the reorganization proposals.
• The plan involves creating a new Delaware-incorporated holding company, Galaxy Digital Inc. (Pubco), which will become the successor public company.
• Existing GDHL ordinary shares will be converted into Class A Common Stock of Pubco.
• Michael Novogratz, GDHL's CEO, will continue to control the business through his ownership of new voting securities in Pubco, expected to be approximately 59.9% of Pubco's voting power.
• Pubco will enter into an amended and restated tax receivable agreement.
• The variable voting rights attached to GDHL's ordinary shares that restrict U.S. shareholder votes will be eliminated.
• Pubco has applied to list its Class A Common Stock on the Nasdaq under the symbol GLXY.
• The reorganization requires shareholder approval, with a special committee of independent directors recommending in favor of the plan.
• The Reorganization Merger, where GDH Delaware will merge with and into Pubco, is not required to be submitted to a vote of GDHL or GDH Delaware shareholders.
• Following the Reorganization and the Reorganization Merger, Pubco will be a holding company, and all activities will be conducted through GDH LP and its subsidiaries.

Sentiment

Score: 7

Explanation: The document is largely factual and procedural, outlining the details of a proposed reorganization. The sentiment is neutral to slightly positive, reflecting the company's belief that the reorganization will enhance shareholder value.

Positives

• The reorganization is expected to provide increased liquidity through access to U.S. capital markets.
• It simplifies and normalizes the capital structure, making it more shareholder-friendly.
• The plan removes restrictions on U.S. shareholder ownership, opening financing opportunities.
• It aligns the principal trading market, governing jurisdiction, and governance structure with Galaxy's U.S. headquarters.
• The prominence, predictability, and flexibility of Delaware law are seen as beneficial.
• The reorganization allows continuity of existence and asset ownership.
• The Class A Common Stock will be issued as freely tradeable for U.S. securities law purposes pursuant to a U.S. registration statement.

Negatives

• The reorganization may lead to increased litigation and insurance expenses.
• Pubco will be subject to stricter SEC reporting standards.
• There is a risk that the potential benefits of the reorganization are not fully realized.
• The change to U.S. GAAP from IFRS will have a meaningful impact on the way cryptocurrency assets are accounted for.
• The stricter regulatory scrutiny and reporting environment are mitigated by ability to access the benefits of transparency, liquidity and flexibility of U.S. capital markets.

Risks

• The reorganization is subject to shareholder approval and regulatory approvals, which are outside the company's control.
• If the reorganization is not completed, the market price of the Ordinary Shares may be materially adversely affected.
• Substantial future sales of shares of our Class A common stock in the public market could cause the market price of our Class A common stock to fall.
• The company will face new challenges, increased costs and administrative responsibilities as a result of Domestication, and management will devote substantial time to related compliance initiatives.
• Our management team has limited experience managing a U.S. public company and some members of senior management are new to our company and our industry.

Future Outlook

The company anticipates enhanced shareholder value through increased liquidity, a normalized corporate structure, and access to U.S. capital markets. Pubco ultimately may choose to delist its shares from the TSX in the future, which would not require further shareholder approval under TSX rules provided an acceptable alternative market exists for Pubcos Class A Common Stock.

Management Comments

• After careful consideration of, among other things, the unanimous recommendation of the Special Committee, the Board has determined (with the interested directors declaring their interest and abstaining on voting with respect to the resolutions related to the Reorganization) that the Reorganization is (i) fair to GDHL shareholders, other than Excluded Shareholders, and (ii) in the best interest of GDHL, and recommends that you vote or give instruction to vote FOR the approval of the Reorganization.

Industry Context

The announcement reflects a trend among companies, particularly in the digital asset space, to seek U.S. listings and normalize corporate structures to attract a broader investor base and improve access to capital.

Comparison to Industry Standards

• The Up-C structure is a frequently used structure in the United States and well-understood by the market.
• The company is seeking a Nasdaq listing, which is a common goal for companies seeking greater access to U.S. capital markets.
• The company is seeking to comply with applicable money transmitter laws in the United States, which is a common requirement for companies in the digital asset space.

Related Party Transactions

• The Issuance of Class B Common Stock is a related party transaction pursuant to MI 61-101.

Stakeholder Impact

• Shareholders are being asked to vote on the reorganization, which will affect their equity ownership and voting rights.
• Employees may be affected by changes in the company's structure and governance.
• The reorganization aims to align all stakeholders interests, including shareholders, employees, and clients.

Next Steps

• Shareholders will vote on the reorganization proposals at the special meeting on May 9, 2025.
• If approved, the company will proceed with the domestication and reorganization merger.
• The company will pursue a listing of its Class A Common Stock on the Nasdaq.
• The company will continue to comply with Canadian Securities Laws for the foreseeable future.

Key Dates

Keywords

reorganization, domestication, Delaware, Nasdaq, shareholder approval, corporate structure, Galaxy Digital, Pubco, Michael Novogratz, Class A Common Stock, GDHL, GDH LP