DEFA14A: Coincheck and Thunder Bridge Business Combination: Pro Forma Financials and Interim Results

This document provides updated pro forma financial information and interim results for Coincheck following its proposed business combination with Thunder Bridge Capital Partners IV, Inc.

Summary

• This document is a supplement to a previous proxy statement/prospectus regarding the business combination between Thunder Bridge Capital Partners IV, Inc. and Coincheck Group B.V.
• It includes unaudited pro forma condensed combined financial data as of September 30, 2024, and for the six months ended September 30, 2024.
• The document also presents Coincheck's management discussion and analysis of financial condition and results of operations for the periods presented in the unaudited interim financial statements.
• Coincheck's unaudited interim financial statements as of September 30, 2024, and for the six months ended September 30, 2023 and 2024 are included.
• The business combination will be accounted for as a capital reorganization, with Thunder Bridge treated as the acquired company.
• The pro forma financial information is presented under both a no redemption scenario and a maximum redemption scenario for Thunder Bridge shares.
• The document details the steps of the business combination, including a loan from Monex, share subscriptions, and a share exchange.
• The pro forma combined balance sheet shows total assets of approximately 682.9 billion yen under the no redemption scenario and 678.4 billion yen under the maximum redemption scenario as of September 30, 2024.
• The pro forma combined statement of operations for the six months ended September 30, 2024, shows a net profit of 344 million yen under both redemption scenarios.
• For the year ended March 31, 2024, the pro forma combined statement of operations shows a net loss of 17.6 billion yen under the maximum redemption scenario.

Sentiment

Score: 7

Explanation: The document presents a positive turnaround in Coincheck's financial performance, but also highlights the risks associated with the cryptocurrency market. The pro forma financials provide a clear picture of the combined entity's potential, but the maximum redemption scenario shows a significant loss for the year ended March 31, 2024.

Positives

• Coincheck's revenue increased by 129.8% for the six months ended September 30, 2024, compared to the same period in 2023.
• Coincheck turned profitable with a net profit of 452 million yen for the six months ended September 30, 2024, compared to a net loss of 382 million yen in the same period of 2023.
• The company has a strong cash position with 10.6 billion yen in cash and cash equivalents as of September 30, 2024.
• The company has a large amount of safeguard assets of 589.9 billion yen, indicating a strong commitment to protecting customer assets.
• The company has reduced its crypto asset holdings to minimize risk exposure.

Negatives

• The pro forma combined statement of operations for the year ended March 31, 2024, shows a net loss of 17.6 billion yen under the maximum redemption scenario.
• The company's revenue is susceptible to significant fluctuations due to cryptocurrency market volatility.
• The company's cost of sales increased significantly due to increased trading volume.
• The company's selling, general, and administrative expenses increased due to increased professional fees and advertising costs.
• The company has a large amount of safeguard liabilities of 589.9 billion yen, indicating a large obligation to protect customer assets.

Risks

• The company's revenue is highly dependent on cryptocurrency market volatility and prices.
• The company's trading volumes are influenced by the price of Bitcoin, Ethereum, and the overall volatility of the cryptocurrency markets.
• The company is exposed to credit risk due to its deposits in financial institutions and cryptocurrency exchange brokers.
• The company is exposed to liquidity risk, which is the risk of being unable to settle obligations using cash or other financial assets.
• The company may need to seek additional equity or debt financing in the future, which could result in dilution or debt service obligations.
• There is a risk that the company may not be able to borrow enough crypto assets from customers or third parties to facilitate trading on its platform.
• The company is subject to regulations of the management of the crypto assets of its customers.

Future Outlook

The company expects further diversification of market participants, to add support for more cryptocurrencies, and for cryptocurrencies use cases to expand. The company anticipates increased advertising costs in the year ending March 31, 2025.

Management Comments

• Management believes that the company has been able to create an expense system capable of securing profits even in periods with low trading volume.
• Management considers the basis of presentation to be reasonable under the circumstances.
• Management believes that its existing cash and cash equivalents are sufficient to meet its immediate working capital and capital expenditure needs.

Industry Context

This announcement is relevant to the broader cryptocurrency industry, which is characterized by high volatility and regulatory uncertainty. The business combination is a strategic move for Coincheck to gain access to public markets and potentially expand its operations.

Comparison to Industry Standards

• Coincheck's revenue growth of 129.8% for the six months ended September 30, 2024, is significant compared to many traditional financial institutions, but is not unusual for a high growth crypto exchange.
• Coincheck's profitability turnaround is a positive sign, but the company's reliance on crypto market volatility is a common risk among crypto exchanges.
• The company's large safeguard assets and liabilities are typical for crypto exchanges that hold customer funds, similar to companies like Coinbase and Binance.
• The pro forma financial information is presented under both no redemption and maximum redemption scenarios, which is a common practice for SPAC mergers.
• The accounting treatment of the business combination as a capital reorganization is consistent with IFRS standards for reverse mergers.

Legal Proceedings

• The company is involved in civil lawsuits related to the NEM hacking incident, with some cases ongoing.

Related Party Transactions

• Monex will advance a loan to M1 GK.
• The company has a 3 billion line of credit and a 3 billion subordinated loan agreement with Monex Finance Corporation.
• The company has a loan agreement for 500 million with JSF Trust and Banking Co., Ltd.

Stakeholder Impact

• Shareholders of Thunder Bridge will receive PubCo Ordinary Shares.
• Coincheck shareholders will become holders of PubCo Exchange Shares.
• Customers of Coincheck will continue to use the platform for cryptocurrency trading.
• Employees of Coincheck will continue to operate the business.
• Creditors of Coincheck will be subject to the terms of the business combination.

Next Steps

• The business combination between Thunder Bridge and Coincheck is expected to close.
• PubCo will convert its legal form to a public limited liability company and amend its governing documents.
• Thunder Bridge and Merger Sub will consummate the Merger, with Thunder Bridge becoming a wholly-owned subsidiary of PubCo.

Key Dates

Keywords

Coincheck, Thunder Bridge, business combination, pro forma financials, cryptocurrency, financial results, merger, SPAC, digital assets, blockchain