Circle's acquisition of Axelar is controversial: giants only want people, not money

Original Odaily Daily@OdailyChinaI'm not sure

By Azuma@azuma_ethI'm not sure

In the early hours of December 16thThe stability money giant, Circle, officially announced the signing of an agreement to acquire the core talent and technology of the initial development team of the Cross-Clear NetworkIn this way & nbsp; Circle's cross-chain infrastructure strategy helps Circle achieve seamless, scalable interoperability on its core products such as Arc and CCTP。

this is another typical example of a good team in the merger industry that seems to be happy, but the key to the problem is - & nbsp;Circle expressly mentioned in the Acquisition Bulletin that the transaction concerned only the Interop Labs team and its proprietary intellectual property rights, and that the Axelar Network, the Axelar Foundation and the AXL tokens would continue to operate independently under community governance, while another contributing team to the original project, Common Prefix, would take over from Interop Labs' original related activities。

In a brief summaryIt's Circe that took away & nbsp; Axelar Network's original development team, but threw away the Axelar Network project itself and its token AXL。

AS A RESULT OF THIS BREAKING NEWS, THE AXL SHORT-LINE DROP WAS SUSPENDED AT AROUND 10 A.M. TODAY AT $0.115, A DROP OF 15 PER CENT FOR 24 HOURS。

at the same time, the particular situation surrounding the acquisition itself as a “no-for-money” and its derived “equity vs tokens” has also given rise to much discussion within the community, and the arguments of those who support this type of acquisition model have been controversial with the opposition。

Opposing arguments: Concealed by RUG, Circle, only currency holders are injured..

IT'S NOT HARD TO UNDERSTAND THAT THE OPPOSITION'S HARD CORE IS PART OF THE VC -- "I PUT MONEY INTO THE PROJECT, TOOK MONEY IN ONE HAND, AND NOW YOU'RE HOOKING UP WITH THE WORK, AND I WANT IT TO WORK?"

Simon Dedic, founder of Moonrock Capital, commented on this:ANOTHER ACQUISITION, ANOTHER RUGI don't know. Circle bought Axelar, but explicitly excluded the Foundation and AXLThis is a criminal act. Even if it is not against the law, it is against morality。If you're a founder of a coin that you want to issue, either treat it as if it were a shareholding, or you get out of here."

Mike Dudas, founder of the Block Consortium and 6MV, commented: "For all those who think it's a coin vs equity issue, I can tell you very clearly that this is not the only way to make a differenceIt's a complete CircleI don't know. There are rumours that the Vice President of Enterprise Development of Circle once said to one of Axilar's co-founders: I don't care about your investors, and without paying them any price, take the CEOs and IPs out of the investor's sight, and these IPs and teams are critical to Arc's start."

The founder of Lombard Finance posted the AXL movement and predicted: “Axelar's core team was bought by Circe, AXL  it may now be worthless。It's been more than three years since the token was issuedI don't know. But the result is very discomfort: teams and/or investors sell tokens for profitHowever, the currency holders can only hope for a distant dream。It's not the same

ChainLink community flag figure   Zach Rynes says: “This once again exposes the problem of conflicts of interest with respect to currency vs equity that plagues the encryption industry. The development team behind the agreement was successfully acquired, while the currency holders who financed the team did not get anything。The so-called continued independent operation of community governance is tantamount to the abandonment of users by development teams in search of better prospects。If we want to attract real capital, that is the primary problem that the industry needs to solve.”

SOAR Ecologist & nbsp; Nicholas Wenzel says: “Axelar tokens are on their way to zero, thanks for your participation.  This is yet another case in which the holders of tokens have gained nothing while the holders of shares have made a lucrative acquisition。It's not the same

Supporting point of view: normal market behaviour, currency at the bottom of the capital structure

If the opposing party would focus more on the unfair treatment of currency holders, the supporting party would focus more on market rules for financing and M & As。

The Chief Investment Officer of Arca, Jeff Dorman, considered that the Circle approach was not problematic and explained in a long manner the capital structure of corporate finance and the natural disadvantages of the currency。

enterprises finance through different levels of capital structure, which themselves have clear priorities, some of which are naturally ahead of the others — & nbsp; secured & gt; unsecured & gt; sub-debt & gt; priority & gt; common & gt; tokens。

There are numerous cases in history that show that there are many of themThe interests of one class of investors are realized at the expense of another。

• In liquidation, creditors win at the expense of equity investors
• IN LEVERAGE ACQUISITIONS (LBOS), EQUITY HOLDERS TEND TO PROFIT AT THE EXPENSE OF CREDITORS
• in low-value m & as (take-under), creditors usually have priority over equity holders
• In strategic acquisitions, creditors and equity holders usually benefit (but not always)
• And tokens are often at the bottom of the capital structure

This does not mean that the token is worthless or that it necessarily requires some kind of “protection mechanism”, but the market needs to recognize a reality: When a company of modest value is acquired and its tokens issued are almost worthless, the holder of the coin will not obtain a “magic bonus” in vain, in which case the equity gains are often realized at the expense of the currency。

“This is normal. If all the value of the future is created by a team, no company is willing to pay back to the investor.”

The core paradox: what is the token

There seems to be a case for both sides of the dispute around the acquisition of "gold money" by Axelar and Circle。

The anger of the opposition is real(b) Currency holders take risks when the project is most difficult, in need of liquidity and narrative support, but are completely excluded from key points of value realization. As a result, the core team and intellectual property rights completed the value realization, while tokens were left in the “community governance” vacuum where the market gave the most direct vote at price, which would indeed defeat the value of all faiths。

Proponents' judgements are equally relevant and legitimate: In the strict sense of the capital structure, the currency is neither a claim nor an equity interest and is naturally not given priority in the context of mergers and acquisitions and liquidation. Circle did not violate the existing commercial rules, but it did so calmly by choosing its most valuable asset。

The real core of the contradiction lies not in whether or not Circle is ethical, but in a long-standing problem that the industry has deliberately avoided:What is a token in the legal and economic structure

In times of great promise, tokens are tacitly referred to as “quasi-equity” and given the illusion of future success; but in reality scenarios such as mergers and acquisitions, bankruptcy, liquidation, and so on, it is quickly re-set back to the “no-claim”。The equity and structural bottom of this narrative are the root causes of the recurrence of conflict。

The Axelar takeover may not be the last such controversy, but it is hoped that it will be an opportunity for industry to further reflect on the positioning and meaning of tokens — & nbsp;It is not natural to have rights, but only to be institutionalized and structured will it be recognized at a critical time, and concrete forms of realization will still need to be explored and practiced by all practitioners。