LMAX is evaluating a new round of capital operations. Sources familiar with the matter say the institutional client-focused trading firm has invited Morgan Stanley and KBW to explore options including a sale, SPAC merger, or public listing, with a potential valuation of up to $5 billion. An IPO on Nasdaq is currently the preferred option.
The company has not yet made a final decision. Sources indicate that LMAX is not in a hurry to push forward with transactions given the current weakness in the crypto market, as its foreign exchange revenue can still provide a buffer, allowing the company to avoid relying entirely on the digital asset business window.
Valuation has increased significantly compared to 2021.
If the valuation proceeds to $5 billion, this would be a significant increase from the approximately $1 billion valuation in 2021. In July 2021, private equity firm J.C. Flowers acquired a 30% stake in LMAX for $300 million, at which time the company's overall valuation was approximately $1 billion.
LMAX, headquartered in London, primarily provides trading venues and infrastructure for banks, brokerages, hedge funds, and asset management firms. The company's business covers foreign exchange and digital assets, emphasizing transparent order books and low-latency execution. It is regulated by the UK Financial Conduct Authority, a crucial foundation for its expansion of crypto products to institutional clients.
Foreign exchange business support waiting window
Sources familiar with the matter say that while institutional interest in compliant digital asset products has rebounded following the approval of the US spot Bitcoin ETF, LMAX can still choose to wait for a more suitable market timing. This is because the company's mature foreign exchange business continues to contribute revenue, reducing the pressure on it to immediately proceed with an IPO or sale during a period of weakness in the crypto market.
If LMAX ultimately chooses to list on Nasdaq, it will join a group of crypto and market infrastructure companies seeking access to the US public capital markets. However, paths such as sale, SPAC merger, and listing in Europe are still under evaluation, and the company retains the option to adjust its direction.
Continue to expand institutional products over the past year
Over the past year, LMAX has continued to expand its digital asset product line for institutional clients, focusing on custody, collateral management, and 24/7 trading.
- In February of this year, LMAX launched a 24/7 multi-asset exchange, supporting trading in forex, precious metals, digital assets, commodities, and tokenized securities.
- In January of this year, Ripple invested $150 million in LMAX through a strategic agreement, with the goal of promoting the use of the RLUSD stablecoin in institutional settings.
- In May of this year, LMAX launched its custody portal Kiosk, allowing clients to deposit digital assets into LMAX Custody and use them as collateral for multi-market trading.
Kiosk supports spot forex, precious metals, cryptocurrencies, CFDs, and perpetual futures. LMAX states that the product aims to integrate custody, collateral access, and trading support into a single process, reducing the need for institutional clients to switch between multiple systems.
LMAX's assessment of its capital operations comes at a time of heightened M&A activity in the crypto industry. The report mentions that Kraken's parent company, Payward, has agreed to acquire derivatives platform Bitnomial, and Bullish has announced its $4.2 billion acquisition of Equiniti, further expanding its tokenization and transfer agency business.
