425: Galaxy Digital Holdings Seeks Shareholder Approval for Delaware Redomiciliation and Corporate Reorganization

Galaxy Digital Holdings Ltd. is asking shareholders to approve a reorganization plan to redomicile from the Cayman Islands to Delaware and normalize its corporate structure, aiming for a Nasdaq listing.

Summary

• Galaxy Digital Holdings Ltd. (GDHL) is seeking shareholder approval for a reorganization and domestication, including redomiciling GDHL and Galaxy Digital Holdings LP (GDH LP) 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 under the symbol GLXY.
• A special meeting of shareholders is scheduled for May 9, 2025, to vote on proposals related to the reorganization, including the domestication, governing documents amendment, and issuance of Class B Common Stock.
• The reorganization involves creating a new Delaware-incorporated holding company, Pubco, which will become the successor public company of GDHL, with outstanding Ordinary Shares converted into Class A Common Stock of Pubco.
• Michael Novogratz, the CEO and Founder of GDHL, will transfer control of the general partnership interests of GDH LP to Pubco but will retain effective control through his ownership of new voting securities of Pubco.
• Following the reorganization, Michael Novogratz is expected to own approximately 59.9% of Pubco's voting power, making Pubco a controlled company under Nasdaq rules.
• Pubco will enter into an amended and restated tax receivable agreement with GDHL, GDH LP, and certain other parties.
• The variable voting rights attached to the Ordinary Shares that currently restrict the aggregate votes that may be cast by U.S. shareholders will be eliminated.
• GDHL shareholders are also being asked to approve certain material differences between the Existing Organizational Documents and the Proposed Organizational Documents.
• The Board recommends that shareholders vote in favor of the reorganization, deeming it fair and in the best interest of GDHL.

Sentiment

Score: 7

Explanation: The document is largely factual and procedural, outlining the steps for a corporate reorganization. While there are inherent risks and uncertainties associated with such a process, the overall tone is positive, emphasizing the potential benefits of the reorganization.

Positives

• The reorganization is expected to provide increased liquidity through access to U.S. capital markets.
• The normalized corporate structure is shareholder-friendly and simplifies the capital structure.
• The reorganization removes restrictions on U.S. shareholder ownership, opening significant financing opportunities.
• The reorganization aligns all stakeholders' interests, including shareholders, employees, and clients.
• The reorganization aligns principal trading market, governing jurisdiction and governance structure to Galaxy's established U.S. headquarters.
• The prominence, predictability, and flexibility of Delaware law is a positive factor.
• The well-established principles of corporate governance in Delaware are beneficial.
• The reorganization increases the ability to attract and retain qualified directors.
• The reorganization allows continuity of existence and continuity of asset ownership.
• The Reorganization allows continued public trading since trading should not be disrupted on the TSX prior to Galaxy's anticipated Nasdaq listing.

Negatives

• Following the reorganization, Pubco may face potential increase in litigation and associated expenses.
• The cost of directors and officers insurance is expected to increase.
• Pubco will be subject to SEC reporting standards similar to, but more stringent than, standards in Canadian markets following the Reorganization.
• The change to U.S. GAAP from IFRS will have a meaningful impact on the way cryptocurrency assets are accounted for, as digital assets will be accounted for as intangible assets rather than receive fair value accounting treatment.

Risks

• There is a risk that the potential benefits of the reorganization are not fully realized, or only partially realized.
• Costs relating to implementing the reorganization may be significantly higher than expected.
• The reorganization may be potentially disruptive to Galaxy as it may interrupt business operations, result in system integration issues or divert management's time away from their usual roles.
• There are risks to GDHL if the reorganization is announced and not completed, including the costs to GDHL in pursuit of the reorganization and the potential impact on the trading price of the Ordinary Shares and the markets perceptions of GDHLs prospects.

Future Outlook

Pubco 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 reorganization and planned Nasdaq listing reflect a broader trend of cryptocurrency and digital asset companies seeking access to deeper capital markets and a more normalized regulatory environment in the United States.

Comparison to Industry Standards

• The document mentions the use of Up-C structures, which are frequently used in the United States, suggesting a move towards industry-standard corporate structures.
• The document references Multilateral Instrument 61-101 (MI 61-101) Protection of Minority Securityholders in Special Transactions, indicating adherence to Canadian securities regulations.
• The document references Rule 405 under the United States Securities Act of 1933 and Rule 3b-4 under the United States Securities Exchange Act of 1934, indicating adherence to US securities regulations.

Related Party Transactions

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

Stakeholder Impact

• The reorganization is intended to normalize GDHLs corporate and capital structure and align all stakeholders interests.
• The reorganization is expected to permit full consolidation vs. passive equity investment for the Pubco and GDH LP financial statement and for U.S. Investment Company Act purposes.
• The Reorganization allows continued public trading since trading should not be disrupted on the TSX prior to Galaxy's anticipated Nasdaq listing.

Next Steps

• Shareholders are urged to read the Management Circular carefully and vote on the proposals.
• Assuming shareholder approval, the reorganization will be effectuated prior to the consummation of the reorganization merger.
• Pubco will seek approval for listing its Class A Common Stock on the Nasdaq Global Select Market.

Key Dates

Keywords

reorganization, domestication, Galaxy Digital, shareholders, Delaware, Nasdaq, Pubco, GDHL, GDH LP, Novogratz, corporate structure, voting rights, Class B Common Stock, special meeting