The Many Risks to 21 Capital | $CEP / $XXI $BTC

Summary

In this video, Forest Hodddle delves into the unknowns surrounding 21 Capital, a new company led by Tether Jack and Mer Soft Bank. The company plans to acquire Bitcoin, starting with 42,000 BTC, but several uncertainties surround its future, such as the success of the SPAC merger, its valuation, potential investments by Tether or SoftBank, and the company's leadership split. Hodddle examines the risks involved in its expansion, the unknowns of its Bitcoin acquisition strategy, and potential ventures into Bitcoin lending and other related services. The video raises important questions for investors to consider before making any decisions.

Takeaways

• 😀 The merger of 21 Capital with a SPAC (Special Purpose Acquisition Company) carries potential risks, such as regulatory issues or delays that could impact its launch.
• 😀 There's uncertainty surrounding the price valuation of 21 Capital, as it's difficult to determine the proper multiple for its Bitcoin holdings and future growth potential.
• 😀 The involvement of Tether and SoftBank in the project raises questions about the extent to which they will invest or buy more equity, potentially influencing the market and ownership structure.
• 😀 CEO Jack Mers' role in both 21 Capital and Strike could lead to divided attention, raising concerns about whether he can manage both companies effectively.
• 😀 Details about the number of employees, their compensation, and the company’s overall financial health remain unclear, raising concerns about the startup's ability to scale.
• 😀 21 Capital's business model includes acquiring Bitcoin, issuing debt, and equity securities, but how they will build and manage this business remains uncertain and will take significant investment and time.
• 😀 There's speculation about 21 Capital’s potential involvement in Bitcoin lending, but the exact nature of their lending model is yet to be clarified.
• 😀 The company plans to integrate with ETFs, including BMAX, which could increase demand for its shares as it enters a competitive market for Bitcoin-backed financial products.
• 😀 The method of holding Bitcoin (whether via partners like Caner Fitzgerald, Coinbase Prime, or internally) and their approach to proof of reserves remains an open question that could affect transparency and trust.
• 😀 Acquiring Strike through a merger or acquisition could be part of 21 Capital’s strategy, but it involves significant financial and logistical challenges that are not guaranteed to succeed.
• 😀 While there’s high potential for 21 Capital to succeed, much of its future success is speculative, and investors need to be aware of the inherent uncertainties in the project, including how fast Bitcoin acquisition and yield growth will happen.

Q & A

What is the main goal of 21 Capital?

The main goal of 21 Capital is to acquire Bitcoin, starting with a base of 42,000 BTC.

What potential risks exist around the merger of 21 Capital with a SPAC?

The main risk lies in regulatory hurdles and potential delays or rejections by the SEC, which could cause the SPAC merger to fail or face setbacks.

Why is there uncertainty around the pricing of 21 Capital?

There is uncertainty because 21 Capital's trading chart is volatile, with large price swings and low liquidity, making it difficult to determine a proper valuation.

Can Tether or SoftBank invest more into 21 Capital after the SPAC merger?

Yes, it is possible for Tether or SoftBank to increase their investment by buying shares issued during the SPAC process, which could further increase their positions relative to other investors.

How will the CEO's dual role at Strike and 21 Capital impact the company?

While the CEO's time will be split between both companies, this is common for CEOs who manage multiple ventures. Much of the day-to-day work will be delegated to other leaders in the organizations.

What unknowns exist about 21 Capital's team and business structure?

There is a lack of information about the number of employees, their compensation, the company's burn rate, and the overall focus of their business model beyond Bitcoin acquisition.

What types of services does 21 Capital plan to offer in addition to acquiring Bitcoin?

21 Capital plans to offer Bitcoin-related financial services, including debt and equity issuance, Bitcoin lending, and advisory services for Bitcoin-related businesses.

How does 21 Capital plan to manage and hold its Bitcoin?

There are several possibilities for how 21 Capital's Bitcoin may be held, such as through financial institutions like Caner Fitzgerald, Coinbase Prime, or Fidelity, or they may hold it themselves. The specifics are still unclear.

What is the uncertainty surrounding 21 Capital's Bitcoin lending strategy?

It is unclear whether 21 Capital intends to lend out its 42,000 Bitcoin directly to earn income or facilitate Bitcoin lending between third parties, such as banks or other financial institutions.

Could 21 Capital acquire Strike, and if so, what would it cost?

It is possible that 21 Capital could acquire Strike in the future, but such an acquisition could cost between $3.9 billion and $6.5 billion, depending on valuation factors, and the specifics of how the acquisition would be funded remain unknown.