Circle Internet Corp. (CRCL), the company behind the USDC stablecoin, saw its stock price plummet 5.08% in pre-market trading on Tuesday. This sharp decline comes just days after the company's blockbuster initial public offering (IPO) and amid growing concerns about its valuation and allocation strategy.
The recent IPO, which saw Circle's stock price soar to over $100 from its initial offering price of $31, has drawn both excitement and skepticism from market observers. Fund manager Gary Black, in a recent interview, pointed to Circle as an area of concern in the market, stating, "We have stocks that are trading at very high multiples that aren't related to their earnings growth. We're always wary, especially in the growth space, that you've got speculative excess."
Adding to the pressure, a Reuters Breakingviews analysis highlighted the potential overvaluation of Circle compared to its rival Tether. The article noted that at Circle's current valuation, Tether would be worth either $60 billion or an implausible $2 trillion, depending on the metric used. This comparison has raised questions about the sustainability of Circle's market valuation.
Furthermore, criticism has emerged regarding Circle's IPO allocation strategy. Arca, a prominent crypto investment firm, publicly criticized Circle for favoring traditional financial institutions over crypto-native funds in its share allocation. This decision has sparked debate within the crypto community about Circle's commitment to the industry that supported its growth.
As the market digests these concerns, investors appear to be reassessing their positions, leading to today's significant pre-market drop. The coming days may prove crucial for Circle as it navigates these challenges and attempts to justify its lofty valuation in the face of increasing scrutiny.
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