- Thomson Reuters
- Telegram is going to hold a second pre-sale for its blockbuster initial coin offering, according to a report by The Verge.
- The messaging app company could raise as much as $1.6 billion before even opening up to the public.
- But some cryptocurrency hedge funds are sitting the sale out because of its high valuation and long lock-up period.
Telegram’s eye-popping initial coin offering just keeps getting bigger.
Business Insider first reported that the messaging app operator, which is a darling of the crypto world, was trying to raise $600 million in a private sale before its public initial coin offering. The company ended up raising $850 million, according to crypto watcher Jon Russell at TechCrunch. Now it’s planning another pre-sale, according to a report by The Verge. Here are the important details from the report (emphasis ours):
“This week, investors got an email explaining that Telegram is doing another private presale four sources with knowledge of the deal told The Verge. The exact amount to be raised is still being determined, according to sources, but two other sources said Telegram is estimating it will be around the same size as the first round, which would bring the total raised to over $1.6 billion before the ICO even opens up to the general public.”
The company is set to use the funds raised from the ICO – which is kind of like a crypto-twist on the initial public offering process – to build a protocol to rival the Ethereum platform. The so-called TON (Telegram Open Network) will “host a new generation of cryptocurrencies and decentralized applications,” according to a white paper reviewed by Business Insider. There’s a lock-up for the ICO, meaning investors won’t receive their TON tokens, or Grams, until December 2018, at the earliest. The company doesn’t expect those tokens to be listed on a major exchange until 2019.
That lock-up is one reason why cryptocurrency hedge funds are staying away from the red-hot deal.
“It’s a high risk, high reward gamble,” Joe DiPasquale, the founder of crypto fund of funds BitBull Capital, which is close to overseeing $20 million in capital, told Business Insider in an interview. “And the risk of having money locked up for almost a year until launch, and up to 18 months after that launch – I’ve personally made the decision to sit on the sidelines.”
DiPasquale also expressed concern about the valuation of the ICO.
“It values them at about $1 billion,” he said. “Think about how many crypto assets that are over a billion, about 26.”
Not to mention, the crypto market has been on a big retreat since the beginning of the year. The entire market for digital coins is 50% lower than where it was at the beginning of 2018, according to CoinMarketCap data.
Sean Keegan, the chief executive of Digital Asset Strategies, told Business Insider that lock-up and valuation are part of why he isn’t getting in on the action, but he also has concerns about a big target on the company’s back: the Russian government.
“Even though the firm is based in Dubai, the Russian government has been trying to go after their data,” Keegan said.
As noted by Bloomberg, the messaging app, which was founded by Russian-native Pavel Durov, has been a target of the Kremlin.
In September, Bloomberg reported Russia’s main intelligence agency told the company “it is obliged under Russian law passed last year to hand over keys allowing the government to decrypt any communications transmitted over it.”