Matt Levine seems to agree. Some quotes from his article:
Is Binance paying FTX tens of billions of dollars for its equity? I would be very, very, very surprised!
My main assumption is that if you are a crypto exchange facing a “significant liquidity crunch,” and you call up a bigger crypto exchange to ask for help, and you sign a deal for them to buy you the same day, then the price that they are paying you is, roughly speaking, zero.
There is precedent. In my world, the most famous precedent is probably JPMorgan Chase & Co. buying Bear Stearns Cos. for $2 per share one Sunday in 2008, “less than one-tenth the firm’s market price on Friday.” (Later the price was revised up.) If you need a bailout from JPMorgan over the weekend, JPMorgan will step in and make sure that your business can keep operating and that your customers will get paid and that the financial system does not collapse, but you won’t get paid much.
But in the crypto world, the famous precedents are pretty much Sam Bankman-Fried bailing out crypto lenders this summer. FTX bailed out BlockFi Inc., getting an option to buy it for as little as $15 millionor as much as $240 million; it had been valued at $3 billion in 2021. Alameda helped out Voyager Digital with a $75 million loan, and FTX ultimately agreed to buy its assets out of bankruptcy, cashing out customers but paying something like $51 million for its actual business; its equity market capitalization was more than $1 billion in April.
This summer large crypto firms were on sale at pennies on the dollar if you had some ready cash and a tolerance for risk; Bankman-Fried did… Now, it seems, his large crypto firm was on sale at pennies on the dollar, and Zhao has the cash.
(As an outsider, setting FTX+Alameda=$2 seems crazy low? But asset breakdown here seems useful)
[SBF] looked poised to leverage his fortune — $26 billion at its peak — to shape the world, donating millions to Democrats and promising that one day he’d give it all away to political causes and charity.
Bankman-Fried’s 53% stake in FTX was worth about $6.2 billion before Tuesday’s takeover, according to the Bloomberg Billionaires Index, based on that fundraising round and the subsequent performance of publicly traded crypto companies.
FTX wasn’t Bankman-Fried’s most valuable asset, though. That was his crypto trading house, Alameda Research, which contributed $7.4 billion to his personal fortune.
The Bloomberg wealth index assumes existing FTX investors, including Bankman-Fried, will be completely wiped out by Binance’s bailout, and that the root of the exchange’s problems stemmed from Alameda. As a result, both FTX and Alameda are given a $1 value.
That leaves SBF’s net worth at about $1 billion, down from $15.6 billion heading into Tuesday. The 94% loss is the biggest one-day collapse ever among billionaires tracked by Bloomberg.
Crypto news site CoinDesk reported on Friday that a token issued by FTX, FTT, made up about a quarter of Alameda’s $14.6 billion in assets. Another item, labeled “FTT collateral,” accounted for $2.16 billion.
Hypothetically, let’s just say I own a business, Andromeda Research, with $500 million of assets and about 8 billion of outstanding liabilities? How much would you pay to acquire this concern? Perhaps $1 might seem quite a lot, in context?
Matt Levine seems to agree. Some quotes from his article:
Here’s a non-paywalled link
Another Bloomberg article to add context [original; non-paywalled].
(As an outsider, setting FTX+Alameda=$2 seems crazy low? But asset breakdown here seems useful)
Hypothetically, let’s just say I own a business, Andromeda Research, with $500 million of assets and about 8 billion of outstanding liabilities? How much would you pay to acquire this concern? Perhaps $1 might seem quite a lot, in context?
I am confused by the claim that FTX’s collapse ⇒ Alameda = fuck all, I thought it had about $10B in non FTT assets. But thanks for sharing!
The original rumour was that Alameda would have net negative assets if FTT coin collapsed. Though there’s a chance it’s actually OK.
Useful context, thanks for sharing