Circle Fade Update: Told You So

Back on June 10th, I wrote up Circle with a simple message, fade it. I said if the run got really dumb, I’d short it. Well, the run did get stupid and I did short it. At one point people were paying something like 50x revenue and the set up was textbook.

It was sweeping everyone’s imagination; it was going to disrupt the entire banking system, it’s TAM was everything, and technologists couldn’t stop telling me that “stablecoins are the future” with no substance, data, or facts. I’ve been in and out of the short a few times as the price has gone from $250 down to $130 (and likely below today) and wish I’d gone bigger, but am still happy with what we published and the money we made.

My underlying goal here at Victaurs here is to win. And what does winning look like? Winning in investing is a bit of a ruthless game. Sorry, but it is. Anyone that has managed money for more than a short time knows that the world is an almost infitine opportunity set of places to put your hard earned capital. And I my mission for this blog is to find where narratives break from true value. Where illogical hype creates opportunities to profit from retail frenzy or where fundamental value is being underappricated. I’ll always try to educate, entertain, but make no mistake the goal is to win.

And so yes the Circle call was a win. Yesterday late in the afternoon, shareholders proved my point, selling 10 million shares in a pre–lock-up expiry deal worth ~$1.3B at $130. This from the same team that rang the bell and rode the IPO to $250, now deciding it’s smarter to sell at $130 than buy.

While this is not unheard of, this is fairly unusual behavior that reminds me of the 2000’s and the tech bubble. A share sale this large inside the lock-up window without pre-IPO documentation only happens when things get really speculative.

My point of caution is this, it’s a dangerous time for retail investors chasing euphoria. More and more companies are rushing to IPO to catch the retail wave. Plenty of them are crytpo ones all trying to “change the world of finance”. And yes some may be good businesses, but plenty of so-called “disruptors” are just using public markets as exit liquidity. VC’s that funded them can smell a blind retail bid like sharks with blood in the water. So keep your head on a swivel.

My opinion is that for now, Circle’s still just a rates trade with rising costs, slow new-product adoption, and insiders cashing out. Do with this what you will.

And this unusual and big share sale rides on their first quarter as a public company, a quarter that was fine, but far from a breakout. One that poured cold water on thoughts of them being worth 50x or 40x or even 30x revenue.

The breakdown and go forward profile - in plain English - is for subscribers below. If you missed the call on June 10th, don’t miss the next one.