Circle’s IPO Raises Doubts as Financial Challenges Surface

Circle's recent move to file for an IPO has sparked skepticism among industry experts, who are raising questions about the company's financial health and future prospects.

While the decision to go public marks a significant step, analysts are concerned about issues related to revenue growth, rising costs, and the overall valuation.

Despite reporting a revenue boost to $1.67 billion in 2024, Circle’s financial data reveals some troubling signs. According to Matthew Sigel from VanEck, while revenue rose by 16%, EBITDA fell by 29%, and net income dropped by 42%. He attributes this decline to rapid expansion, costly integrations, and the discontinuation of services like Circle Yield, which previously generated additional revenue. The company’s distribution and transaction expenses have also surged, largely due to high fees paid to partners such as Coinbase and Binance.

This situation has led some analysts to question whether Circle is overspending just to maintain its stablecoin market position. Farside Investors pointed out that in 2024, distribution and transaction costs exceeded $1 billion, far higher than similar competitors like Tether. They also noted Circle’s vulnerability to market shocks, recalling the company’s $720 million loss in 2022 amid crypto market turbulence.

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Financial efficiency is another concern, with the company reportedly spending over $250 million on compensation and $140 million on administrative costs. Omar, an independent analyst, questioned how Circle justifies a $5 billion valuation, highlighting structural challenges and high operating expenses.

There are also doubts about the IPO timing, with some experts suggesting that the move could be an attempt to secure liquidity amid financial uncertainty. Wyatt Lonergan from VanEck speculated on possible scenarios, including a future acquisition by Coinbase if the IPO underperforms or a potential bid from Ripple pushing Circle’s valuation higher.

As the company moves closer to its public debut, questions linger about whether Circle can sustain growth while addressing financial challenges and competitive pressures in the stablecoin market.

Alexander Stefanov