Misslyckad fusion mellan Galaxy Digital och BitGo resulterar i en stämning på $100M

Tillkännagivet 2021 fångade Galaxy Digital (GLXY ) många uppmärksamhet när de meddelade avsikt att köpa BitGo (BTGO ) för en häpnadsväckande $1.2B i aktier och kontanter.  Fast forward 15 months, and it appears as though the deal has fallen through.

While deals fall through all the time, this particular situation has just become heated with BitGo announcing it now intends on suing Galaxy Digital for $100M in damages that Galaxy Digital is reportedly refusing to pay.

What Happened?

Ursprungligen var anledningen till detta förvärv av Galaxy Digital enkel – förvärva en etablerad förvaringsplattform för att bli en ‘one-stop shop’ för institutionella investerare.

Affären var beroende av olika krav som BitGo skulle uppfylla.  Per Galaxy digital, one of these was to provide financial statements before an agreed upon deadline, which it alleges BitGo did not meet.

Naturally, this allegation is refuted by BitGo, with its legal team calling the claim ‘absurd’ and that “BitGo has honored its obligations thus far, including the delivery of its audited financials”.

Foreshadowing

Upphävandet av avtalet mellan Galaxy Digital och BitGo kanske inte kommer som en stor överraskning för åskådare, eftersom affären redan hade stött på ett problem i mars 2022.

Due to a delay in its application with the SEC to be registered as a Delaware based entity, and developments at each company, terms of the deal were amended.  These amendments would have seen BitGo compensated at a slightly higher rate than originally agreed upon, with Galaxy digital citing the custodians internal growth over that time.  While this bode well for BitGo, it meant that the deal would not be finalized until after the SEC announced its decision on Galaxy Digital and its request.  This meant now including an extension on the deal and a clause which, for agreeing to the extension, would see BitGo compensated with a $100M ‘reverse break fee’ if Galaxy Digital decided to back out.

The Ramifications

Naturligtvis har Galaxy Digital och deras beslut att dra sig ur affären irriterat BitGo på ett allvarligt sätt.  As previously stated, the latter has now announced its intent to sue Galaxy Digital, citing wrongful termination of the merger agreement.

The company states that it, “…intends to hold Galaxy Digital legally responsible for its improper decision to terminate the merger agreement with BitGo, which was not scheduled to expire until 31 december 2022, at the earliest and to not pay the $100 million reverse break fee it had promised back in mars 2022 in order to induce BitGo to extend the merger agreement. Galaxy informed BitGo of both decisions this past Friday.”

Looking Forward

Affären, som ursprungligen tillkännagavs mitt i den senaste kryptobullmarknaden, kanske inte längre är meningsfull för Galaxy Digital då företagsvärderingarna har fallit kraftigt sedan dess.

Galaxy Digital itself has incurred massive losses in 2022, and seen its shares drop to a fraction of what they once were.  While nullifying the deal most likely makes sense, only time will tell if BitGo is found entitled to its $100M claim for the damages it states it has incurred.