San Francisco-based digital asset exchange Kraken has reportedly completed a $13.5 million investment round through an internet-based fundraising platform, called Bnk To The Future (BF).
Notably, Kraken’s latest crowdfunding campaign is the largest investment round BF has managed. The regulated crypto futures and spot trading platform received investments from 2,263 different investors.
Kraken Seeking $4 Billion Valuation After Fundraiser
According to Coindesk, the American exchange operator had been seeking additional capital in order to increase its present valuation (as a company) past the $4 billion mark. The funds raised will also be used to make new acquisitions and also directed towards financing other initiatives that are aimed at further expanding Kraken’s business operations.
Kraken’s management has already made a few key acquisitions including a $100 million acquisition of UK-based Crypto Facilities (in February 2019), an established futures and derivatives trading platform. The US-based exchange has also acquired CryptoWatch, a financial data and trading platform.
$85 Billion In Crypto Trades Settled In 2018
As one of the leading crypto exchanges, Kraken settled trades worth a total of $85 billion in 2018. The exchange’s trading volume reportedly came from over four million traders located in 200 different countries.
In order to help Kraken further expand its line of products and services, BF has established a “Special Purpose Vehicle” (SPV) - which will allow the exchange company to receive equity from over 2,200 investors. Referred to as illiquid investments, the equity-based transactions will be facilitated through the SPV in an indirect manner.
Bypassing Current Regulatory Requirements
Acting as a single investment manager, the SPV will accumulate funds contributed by all parties interested in holding a stake in Kraken. Notably, Kraken’s decision to raise capital in this manner will allow it to avoid having to register as a public company - which existing U.S. regulations require under the 1934 Securities and Exchange Act.
Although Kraken’s investors will not be shareholders, they will be entitled to a certain return on investment (ROI) if the US-based exchange offers its shares via an initial public offering (IPO). However, the shares must be acquired through a different organization and potentially also through Kraken itself if it decides to opt for a Management Buy-Out.
High-Risk, Speculative Investment
Commenting on the initiative, BF’s management cautioned:
This is a high risk high returns platform – please understand this before investing.
Meanwhile, Kraken added that investors would be able to reduce risk as they would be acquiring a preferred share class with the ability to liquidate their funds. However, the American exchange did acknowledge it was a speculative investment.
An email sent to the initiative’s investors suggests that staking funds in Kraken’s business would have the following advantages:
CryptoWatch Premium membership, the ability to leverage shares for margin collateral, priority service from our client support team, invitation to Kraken’s exclusive investor chat room, subscription to Kraken’s Daily Hash newsletter and OTC Daily report, bi-annual Kraken investor update, beta access to new Kraken products and features, limited edition Kraken swag, [and] 5% investment rebate in KFEE.
Will Only Make Money If Kraken Sells for Over $4 Billion
According to an analysis by BF, a $1,000 investment in the company’s project would be worth around 48 future shares from a total of 201,612,210. If Kraken gets valued at $4 billion, then the 48 shares purchased would give the holder only a 0.00002380808% stake.
BF’s analyst further noted:
And that’s about the sum that you invested. But as you are in the “preferred share class” you get your investment back even if Kraken sells only for $112 million. Only if Kraken sells for more than $4 billion we will make money.