EOS Developer Block.One Attempts 10% Private Buyback of Its Stock

EOS developer Block.one is attempting a 10% buyback of its stock, offering backers a share repurchase price that will return as much as 6,567% on their initial investments. The news was reported by Bloomberg on May 22.

According to Bloomberg, the buyback values the company at around $2.3 billion, up from about a $40 million valuation in the 2017 seed round. The repurchase price being offered is $1,500 per share — up 6,567% from the original price of $22.50.

As Bloomberg notes, investors who ostensibly stand to benefit from this return include PayPal co-founder Peter Thiel, Jihan Wu of crypto mining hardware giant Bitmain and hedge fund managers Alan Howard and Louis Bacon — all of whom bought into EOS back in July 2018.

Bacon and Howard reportedly declined to comment over whether they would tender their shares, with Bloomberg noting that Thiel did not respond to multiple messages by press time.

As reported today, Michael Novogratz’s crypto merchant bank Galaxy Digital accepted the buyback offer and sold its shares in Block.one for $71.2 million — realizing a 123% return on its initial investment. Novogratz stated that substantial outperformance from Block.One had contributed to the decision.

However, the buyback offer from Block.one — which raised a record-breaking $4 billion through its year-long token crowdsale ending in June 2018 — has sparked some criticism from industry onlookers.

In an interview with Bloomberg, Nic Carter — a partner who focuses on blockchain at Boston-based investment firm Castle Island Ventures — remarked that:

“A private buyback of this sort signals to me that the company believes that there are few growth opportunities in sight, or badly wants to consolidate ownership and avoid outside scrutiny.”

As Bloomberg notes, Block.One made a previous stock repurchase offer in which it sought to acquire 15% of its outstanding shares, priced at $1,200 each. The company reportedly succeeded in repurchasing 13.8%, at a total cost of around $300 million.

Bloomberg cites a March 2019 email to shareholders that reportedly indicated that EOS’ total assets, including cash and investments, amounted to $3 billion at the end of February. $2.2 billion of these were held as what the company termed in its email “liquid fiat assets,” with most invested in U.S. government bonds. The email also reportedly revealed that the company’s crypto portfolio had halved to around $500 million during the bear market.

EOS, Bloomberg notes, is a major holder of bitcoin (BTC) — ostensibly holding 140,000 BTC.