Winklevosses prep Gemini for lift-off
Gemini Space Station’s Nasdaq listing will prove a big pay day for co-founders Cameron and Tyler Winklevoss with the conversion of loans the twins personally extended to the crypto exchange.
Joint bookrunners Goldman Sachs, Citigroup, Morgan Stanley and Cantor on Tuesday launched marketing of 16.7m shares at US$17–$19 to raise up to US$316.7m from the IPO. The book was “well covered with conversions from one-on-one meetings", a banker on the deal told IFR.
It is still early days as the offering is not scheduled to price until Thursday, September 11.
The deal is all primary and the Winklevosses will convert US$695.6m of loans into equity at a 20% discount to the IPO price.
While pre-IPO converts are commonplace, typically they are provided by financial institutions. The scale is also large compared to the IPO.
The conversion of US$695.6m of debt will deliver US$869.5m of stock at the IPO price, 48.3m super-voting class B shares at a mid-range US$18.
“Pre-IPO converts do occasionally appear when investors pony up the money upfront to get the company going, and those get converted at a discount at IPO,” said a convert banker away from Gemini IPO. “With the conversion at the IPO, it allows the company to start clean.”
As a result of the conversion, Gemini’s debt load will drop to US$1bn from US$1.8bn, the company outlined in marketing materials.
A number of investors have asked whether the 20% discount befits borrowings that were extended just nine months to two years prior.
“The debt was extended over the course of the year, so it warrants a lower valuation,” said a banker on the deal.
Nevertheless, the banks are fielding inbound calls from investors about the pre-IPO converts, bankers told IFR.
Gemini issued four convertible bonds totalling US$200m to the twins’ private investment firm between September 2023 and March 2024. Those bonds pay an 8% annual coupon.
As of June 30, accrued interest on those CB stood at US$24.5m.
Separately, the Winklevoss financing vehicle lent Gemini US$475m in convertible term loans funded in Bitcoin, Ether and other cryptocurrencies.
Those loans were extended at an interest rate of “no less than 4% and no greater than 16% per annum”. As of June 30, US$405.5m remained outstanding and US$17.4m in interest unpaid.
Together with the shares received during the IPO, the twins' combined stake in Gemini grows to 74.8m Class B shares, or US$1.3bn. The pair will control 94.7% of Gemini’s voting rights.
Notably the pre-offer and post-offer ownership tables in the IPO prospectus are the same for the twins, assuming the conversion has already happened.