2102002 Informal Interpretation

Date:

Tags:

Rule:
801.21
Staff:
Nora Whitehead
Response/Comments:

Yes, we still consider cryptocurrencies cash equivalents when acquired.

Question

From: Whitehead, Nora


Sent: Monday, February 22, 2021 3:22:44 PM (UTC-05:00) Eastern Time (US & Canada)


To: [Redacted]


Cc: [Redacted]


Subject: RE: Inquiry

Yes, we still consider cryptocurrencies cash equivalents when acquired.

From: [Redacted]


Sent: Friday, February 19, 2021 3:08:38 PM (UTC-05:00) Eastern Time (US & Canada)


To: [Redacted]


Subject: Inquiry

Dear All:

I have a transaction in which Company A is selling a US business to Company B in a reportable transaction. As consideration for the sale, A is receiving $70 million in cash and approximately 14% of the voting securities of B now valued at approximately $500 million.

The size of parties test is satisfied but I am analyzing whether 802.4 would eliminate the need for a filing with respect to A’s acquisition of B’s voting securities—notwithstanding the high and increasing value of the stock.

B is a company engaged in bitcoin mining. B’s most recent regularly prepared balance sheet shows a total of $95 million in assets, with cash of $32 million and cryptocurrencies at $40 million. An additional $20 million is listed for equipment and deposits on equipment. Patents are listed at less than $1 million. Total sales in 2020 were approximately $10 million.

In 2018, Interpretation 1805003 took the position that an acquisition of cryptocurrencies , such as bitcoin, was exempt because cryptocurrencies were a cash equivalent.

Is that still the case? If so, it seems to me that the buyer would have to value the fair market value of B’s assets, excluding cash and cryptocurrencies, to determine if that value exceeded $92 million. If it did not, a filing would not be required for the back-end of the transaction.

 

 

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Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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