Gemini latest to tout retail clout in US$425m IPO
Gemini Space Station founders Cameron and Tyler Winklevoss had a heavy hand in the pricing of the crypto exchange’s IPO at US$28 on Thursday, capping the amount of money raised at US$425m and stipulating that an oversized amount of stock went to retail investors.
The crypto exchange priced its IPO above the revised US$24–26 range, which was shifted upwards by seven dollars on Tuesday, but lowered the number of shares sold to 15.2m from 16.67m.
The move was foreshadowed. The last deal message before pricing said “given sensitivity from the founders to dilution, proceeds will be capped at US$425m on the base deal. Any further increase in price will reduce the shares sold as if this was a fixed proceeds offering”.
Winklevoss holds nearly 95% of the voting power after the IPO and a private placement to Nasdaq.
Even before limiting the amount of shares, the all-primary offering was more than 20 times oversubscribed. That strong demand reflected “long-only and sector-dedicated” institutions and an 80% hit rate from one-on-one roadshow meetings.
Goldman Sachs, Citigroup, Morgan Stanley and Cantor started the proceeds the week before with 16.67m shares at US$17–$19. On Tuesday, Nasdaq committed to invest US$50m alongside the IPO through a concurrent private placement, adding strategic partner to exchange partner.
“The idea was that Gemini has been very close to retail investors,” one banker involved in the offering process told IFR. “It’s their ecosystem. They want to give back to retail investors, who’ve been very supportive.”
Gemini has 1.5 million retail investors on its platform. In the first seven months of the year, retail investors traded US$31.3bn worth of securities, or 13% of total trading volume, the Winkelvosses outlined in their roadshow presentation.
The payback saw retail allocated between 20% and 30% of the IPO, two bankers told IFR.
Affinity-based allocations are hardly novel – Uber set aside stock for drivers on its IPO in 2019. Reddit also sent invitations to its heavy users, so they could buy up to 1,000 shares in the IPO. But there is a tipping point where retail becomes the price setter, and institutional investors the followers.
Tom Farley started this trend by allocating “more than 20%” of Bullish’s US$1.1bn NYSE IPO to retail in August.
“We want to break the mold here and wanted retail to participate,” said Bullish CEO Tom Farley in an interview with CNBC. “Retail may be the marginal price setter. But frankly, we feel retail is underestimated with respect to their sophistication.”
The 20%–30% retail/70%–80% institutional split is far above the 5%–7% retail typical on an IPO.
“Most CEOs and boards want to know who their shareholders are,” said a senior banker away from the Gemini IPO. “They’re going to want to have people who can stick with them in good times and bad.
“So they are going to want to be much heavier on institutional allocations.”