Jessy, Golden Finance
On June 16, the Financial Times reported that Tron has reached a reverse merger agreement with Nasdaq-listed SRM Entertainment.
SRM Entertainment announced on June 16 that it has signed an agreement with private investors to use $100 million in equity investment to launch the Tron token (TRX) treasury strategy. The new entity plans to inject $210 million worth of token assets and change its name to "Tron Inc."
According to people familiar with the matter, the newly established "Tron Inc." will adopt MicroStrategy's strategy of issuing convertible bonds to buy Bitcoin, purchase and hold TRX tokens, and build itself into a leveraged digital asset investment tool. This move is also seen by industry insiders as an upgraded imitation of MicroStrategy's "holding Bitcoin" strategy.
However, unlike MicroStrategy's purchase of Bitcoin to simply bet on the rising returns of Bitcoin, TRON's TRX purchase strategy is more of a promotion of the TRX token itself, and a more direct capital operation is to purchase TRX through financing, raise TRX and thus stretch the price of TRX itself.
This move by TRON is not a precedent. Previously, Sharplink also purchased Ethereum through financing. Like the close interest relationship between TRON and TRX, Sharplink and Ethereum itself also have a very high interest relationship.
This move by Sharplink and TRON may herald a new beginning for the industry. Crypto companies are not only actively seeking to go public, but also actively raising funds to purchase their project tokens after going public. A new way of operating capital has begun.
The Tron model is fundamentally different from the MicroStrategy model
According to existing information disclosure, Tron went public through a backdoor listing with SRM Entertainment, the newly established Tron Inc., and then followed MicroStrategy's example by issuing convertible bonds to raise funds to purchase TRX tokens.
Sharplink, a Nasdaq-listed company that announced the purchase of ETH some time ago, used $425 million in private equity financing (led by Consensys Software Inc., which is highly related to the interests of Ethereum) to purchase ETH. And Joseph Lubin, co-founder of Ethereum and founder and CEO of Consensys, will serve as chairman of the board of directors of SharpLink.
Although the two have different specific operating methods, they are essentially similar. Whether it is Tron Inc or Sharplink after being invested, the purchase of TRX and ETH is deeply bound to their own interests, while MicroStrategy and a number of companies that follow its example to purchase Bitcoin are just third-party asset allocations.
If the rise and fall of Bitcoin prices and the profit and loss of MicroStrategy's investment still rely on everyone's consensus on "digital gold", the operation of TRON is completely a blatant act of pulling TRX with the left hand leading the right hand.
In specific operations, it bypassed the strict review of traditional IPOs and landed on Nasdaq through SRM, which has a market value of only $30 million. Subsequently, the TRON Foundation invested in the new entity "Tron". Inc." injected $210 million worth of TRX tokens, allowing the listed company to instantly control 17% of TRX's circulation, which also laid a dictatorial foundation for the company to manipulate the price of the currency. In the end, the new company is expected to raise funds by issuing convertible bonds to buy TRX, falling into a cycle of "issuing bonds-purchasing coins-pulling the market-issuing bonds again." The price of TRX can spiral up under this operation. Ignored risks under the frenzy
After the announcement of the transaction, SRM's stock price soared by more than 300% on Monday, and TRX also soared, but the risks were ignored by investors.
Although the operation of TRON imitates micro-strategy, the practice of coin micro-strategy is much more risky. First of all, the market value and liquidity of TRX are much lower than Bitcoin. If "Tron Inc." buys TRX on a large scale through financing, it will be difficult for the company to control the circulation of TRX. TRX may push up the price of the currency in the short term, but this rise lacks the support of real demand and is essentially an artificial illusion of liquidity.
MicroStrategy purchases Bitcoin by issuing bonds and stocks to raise funds. In essence, it is betting on asset appreciation with low-interest debt. This strategy relies on the long-term appreciation trend of Bitcoin. However, if the price of TRX falls, "Tron Inc." may face the risk of insufficient collateral, debt default or forced liquidation.
The risk of supervision has always existed. Although the US SEC's investigation into Sun Yuchen has been suspended, it does not mean that supervision will withdraw, especially the SEC's attitude towards the securitization of cryptocurrencies is still cautious. Although the attributes of TRX tokens have not yet been clearly determined at the US regulatory level, if TRX is identified as a "security", financing, holding and other behaviors must comply with the provisions of the Securities Act of 1933, otherwise it may constitute illegal issuance.
In addition, the operator of this transaction, Dominari Securities, has close ties with the Trump family, and Eric Trump is expected to be in the newly established "Tron Inc." This relationship may also attract the attention of US regulators.
As for financial operations alone, TRX's "consensus basis" and "safe haven properties" are far inferior to Bitcoin. TRON's operations are more like using listed company shell resources to speculate on the market value of cryptocurrencies. The core risk is to use high leverage to bet on an asset with fragile liquidity, vague regulatory qualitative, and lack of independent value support. Once the market environment reverses or regulation tightens, the bubble will burst.