Tether Seeks 200 Billion USD Funding, Valuation Could Reach 5000 Billion USD

Tether, the leading issuer of the stablecoin USDT, is in discussions with investors for a significant funding round of up to 200 billion USD. This move, if successful, would value the company at approximately 5000 billion USD, placing it among the most valuable private companies globally, alongside tech giants like OpenAI and SpaceX. The company, headquartered in El Salvador, is exploring a private placement to sell around 3% of its shares, with the target fundraising amount ranging from 150 billion to 200 billion USD. However, one source involved in the negotiations suggested that the final amount raised could be considerably lower than the upper limit. The discussions are still in the early stages, and details of the transaction may change.

If the 200 billion USD fundraising is achieved with a 3% equity stake, Tether's overall valuation would approach 5000 billion USD. This would be a landmark achievement for a company in the cryptocurrency industry. In comparison, Circle, Tether's main competitor in the stablecoin market, had a market value of around 300 billion USD. The new funding round will involve issuing new shares and will not require existing shareholders to sell their stakes. Cantor Fitzgerald is serving as the principal advisor for this transaction.

Tether's USDT, pegged to the US dollar, currently has a market value of approximately 1720 billion USD, significantly outpacing Circle's USDC, which stands at around 740 billion USD. Tether's primary revenue model involves investing USDT reserves in cash-like assets, such as US Treasury bonds, and earning interest from these investments. According to a company blog post from July, Tether reported a profit of 49 billion USD for the second quarter. The CEO recently claimed that the company's profit margin is as high as 99%. However, Tether's financial disclosures do not adhere to the reporting standards of publicly listed companies, leading to questions about transparency.

During the Federal Reserve's interest rate hike cycle, high interest rates have generated substantial earnings for Tether. However, as US interest rates decline, this "interest rate arbitrage" advantage may diminish, posing a challenge to the company's profitability. In recent years, Tether has faced regulatory conflicts, leading to its withdrawal from the US market. In 2021, the company paid a 4100 million USD fine to settle allegations of misrepresenting its reserve status with regulatory authorities.

Tether is accelerating its preparations to re-enter the US market, planning to launch a stablecoin regulated by US authorities. The company has appointed a former White House official responsible for cryptocurrency policy to lead this new initiative, aiming to capitalize on favorable regulatory policies. This strategic move underscores Tether's ambition to expand its global footprint and solidify its position as a dominant player in the stablecoin market.