Terms of BitGo acquisition amended as Galaxy Digital’s stock plunges

Crypto merchant bank Galaxy Digital has amended the terms of its bid to buy digital-asset custodian BitGo in a combination of cash and stock transaction.

Mike Novogratz

According to the company’s executive, Mike Novogratz, Galaxy and BitGo have renegotiated the acquisition agreement they signed back in May 2021. While the deal was originally planned to complete in the first quarter of 2022, Novogratz now expects to finalize the takeover at a later date.

More specifically, the transaction will close immediately following “the domestication of Galaxy Digital as a Delaware corporation.” This move is subject to approval by the company’s shareholders as well as other acquisition-related closing conditions and regulatory approvals. The crypto merchant anticipates the domestication to take place between Q2 and Q4 of 2022, subject to the ongoing SEC review process.

CEO Novogratz also noted at an earnings call the key change made to the financial terms of the deal. The new acquisition terms will see BitGo shareholders receive 44.8 million newly issued Galaxy shares and $265 million in cash. This compares to paying 33.8 million shares and the same amount of cash to finance the acquisition in the previous agreement.

Galaxy struggles with weak financials

Although BitGo holders will own 12% of the combined company versus 10% to settle the original deal, the implied value is virtually unchanged from the $1.2 billion announced in 2021. Galaxy’s share price, which trades in Toronto, has slipped since then to trade at $12 from around $30 when the firms originally signed the deal.

In the release, Galaxy said it plans to re-organize and relocate its corporate domicile to the US in anticipation of a Nasdaq listing. However, the updated terms include a hefty fine should Galaxy Digital fail to finish up the acquisition by December 31.

“A reverse termination fee of $100 million will be payable by Galaxy Digital to BitGo in certain circumstances if the transaction has not been completed by December 31, 2022, subject to specific provisions,” the statement reads.

Michael Novogratz, a former Goldman Sachs macro trader, launched Galaxy Digital in November 2017 and contributed $300 million of his own assets just a month before bitcoin peaked near $20,000. He also worked previously as CIO of Fortress Investment Group’s macro fund.

In its latest financial disclosure, the New York-based firm expects to report a net loss of $120 million during the twelve months through December 2021. This figure includes unrealized losses on crypto holdings which were caused by weak trading volumes and losing trades.