[Exclusive] Morgan Stanley Joins 2 Trillion Won Bithumb Acquisition Battle... Nexon Deal Virtually Collapsed

Morgan Stanley Negotiating to Acquire Bithumb Shares via Bident
Negotiations with NXC, Previously Likely, Have Essentially Failed

[Asia Economy Reporter Lee Seon-ae] Global investment bank (IB) Morgan Stanley has entered the bidding war to acquire Bithumb (corporate name Bithumb Korea), the largest cryptocurrency exchange in South Korea. Previously, JP Morgan and the Chicago Mercantile Exchange (CME) Group affiliates were also negotiating deals to acquire shares in Bithumb, heating up the 'Bithumb sale battle.' The deal with NXC, the holding company of Nexon, which had shown strong intent, is now highly likely to fall through.

According to the IB industry on the 19th, it has been confirmed that Morgan Stanley is negotiating to acquire shares in Bithumb through Vidente. Vidente holds 10.3% of the shares in Bithumb Korea, the operator of Bithumb, and also owns 34.24% of Bithumb Holdings, the largest shareholder of Bithumb Korea, making it the single largest shareholder in Bithumb's current shareholding structure.

A senior official at Bithumb Holdings hinted, "Morgan Stanley participated in the Bithumb acquisition deal through Mr. A, a major player in mergers and acquisitions (M&A) who had previously participated in the Bithumb acquisition battle (an entertainment company chairman)." A source familiar with the Bithumb sale negotiations said, "The reason Morgan Stanley is using Vidente is because Vidente holds the right of first refusal to acquire Bithumb Holdings." When selling or transferring Bithumb Holdings shares, Vidente's consent must be obtained.

Morgan Stanley's acquisition intent is said to be quite strong. They plan to invest approximately 300 to 500 billion KRW to secure shares in Bithumb. Morgan Stanley, a mega IB with assets under management totaling 4 trillion USD (about 4,520 trillion KRW), has long taken a stance recognizing Bitcoin as a regulated asset. It was the first on Wall Street to open the path for Bitcoin fund investments. On the 17th (local time), economic media CNBC cited sources saying, "Morgan Stanley is the first major bank to allow asset management clients to invest in Bitcoin funds," and "It will launch three funds that allow ownership of Bitcoin." This move by Morgan Stanley is unprecedented on Wall Street and is expected to be an important milestone for Bitcoin's recognition as an asset. Bloomberg recently also reported that "Morgan Stanley Investment Management, Morgan Stanley's asset management arm, is reviewing Bitcoin investment."

NXC is reportedly at a disadvantage in the acquisition battle. Although Kim Jung-ju, CEO of NXC, has shown strong acquisition intent, negotiations have stalled and failed to gain momentum. As global financial firms have been sending 'love calls' to Bithumb one after another, the dynamics of the sale negotiations have changed, and differences remain unresolved regarding the transaction terms demanded by NXC. A senior official at Bithumb Holdings said, "Nexon proposed a clause that would shift damages to Bithumb in case of hacking issues, legal problems, or profitability deterioration, but Bithumb rejected this, effectively ending the deal."

Currently, there are as many as eight parties, including Morgan Stanley, sending love calls in the Bithumb acquisition battle. The market values Bithumb's corporate value at about 2 trillion KRW. Operating profit was 48.1 billion KRW in 2019, but in January this year alone, it recorded nearly 20 billion KRW in operating profit. The recent average daily trading volume is known to be between 5 trillion and 7 trillion KRW. Bithumb's average daily mobile application users in February are estimated at 500,000 to 700,000, and including PC users, the total is estimated to reach 1 million.

When the sale negotiations were in full swing last November, Bitcoin was trading around 15 million KRW. The sale price for the 65% stake at that time was known to be about 500 billion KRW, and as Bitcoin prices rose, there were expectations that negotiations would take place around 700 to 800 billion KRW. Since then, Bitcoin has continued to rise, surpassing 71 million KRW on the 14th, raising market expectations for a revaluation of Bithumb's corporate value.

The estimated market capitalization of Coinbase, the number one cryptocurrency exchange in the U.S. currently pursuing a Nasdaq listing, is about 100 trillion KRW. Despite the sharp decline in U.S. tech stocks, Bitcoin's strength has increased its corporate value to reach 100 trillion KRW. Considering Coinbase's estimated corporate value and Dunamu, the operator of the domestic cryptocurrency exchange Upbit, whose corporate value has soared to 2 trillion KRW, the industry views that Bithumb will also receive a valuation comparable to Dunamu.