RVNU #028: The Circle IPO Robbery
A Modern Day Heist in Plain Sight
💡 Founder Alert: Circle's June 2025 IPO represents the most egregious example of investment bank value theft I’ve ever documented. This isn't the "normal" 25% underpricing—this is systematic wealth extraction that demands immediate attention from every founder.
The $3B Heist: Circle's Numbers Don't Lie
What Circle's Investment Banks Did:
Sold 14.4M shares at $31 per share during IPO
Total IPO proceeds: $446M
Same shares 15 days later: worth $240 each
Current value: $3.456B
The Theft: $3.01B transferred from Circle shareholders to investment bank clients who contributed nothing to building the company.
The Scale: This represents a 673% underpricing in 15 days. Jay Ritter's research shows "normal" IPO underpricing at 25%. Circle's banks stole 27X more value than the already-problematic industry standard.
💡 THE ROBBERY EXPLAINED
Investment banks bought shares from Circle at $31, immediately allocated them to their best clients, who then sold them for massive profits. The $3B in profits went to random bank clients who had zero involvement in Circle's success. This money should have gone to Circle's employees and early investors who actually built the company.
Why This Is Modern Day Robbery
Traditional Robbery: Someone takes your money with a weapon
Investment Bank Robbery: Someone takes your money with a contract you're told is "market standard"
The Circle employees who sold shares lost $3B to people they'll never meet, who contributed nothing to Circle's success.
This isn't capitalism—it's pre-meditated extraction. The banks didn't build Circle's technology, hire the team, acquire the customers, or create the value. They simply positioned themselves as mandatory middlemen and extracted billions.
How This Destroys Your Company and Team
Employee Impact from 673% Underpricing:
Every employee lost 87% of their expected equity value
VP Sales expected: $2.5M → actually got: $325K
Engineering leads expected: $1M → actually got: $130K
Result: Total employee wealth destruction approaching $2B+
Talent Retention Crisis:
Your best employees realize equity promises are systematically broken
Top performers leave for companies offering immediate stock compensation
Recruiting becomes impossible when candidates understand IPO reality
Strategic Damage:
Public market undervaluation makes you acquisition target at fire-sale prices
Quarterly earnings pressure destroys long-term value creation
Compliance costs drain resources that should build the business
The Solutions That Protect Your Team
Option 1: Strategic M&A
Why This Works: Strategic buyers pay for what you built, not what banks decide to price it at.
M&A typically pays 20-50% premiums to fair value
No bank underpricing or client enrichment schemes
Employees get full value for their contribution
Option 2: SPACs (When Done Right)
Why SPACs Beat Traditional IPOs:
Merger price is negotiated, not dictated by banks
No underpricing schemes benefiting random bank clients
Fees are disclosed upfront and negotiable
Employees convert at negotiated value, not discounted price
💡 SIDEBAR: SPACs vs IPO Robbery
SPACs: Value transfers are disclosed and negotiated upfront. SPAC sponsor gets known percentage for bringing deal. All parties know the terms.
Traditional IPOs: Value transfers are hidden through "underpricing." Banks claim they're "making markets" while systematically enriching their clients with your company's value.
Key Difference: SPACs are transparent value exchange. Traditional IPOs are disguised wealth extraction.
⚠️ SIDEBAR: Bad SPAC Deals to Avoid
Red Flags in SPAC Structures:
Excessive sponsor promote: Some SPACs give sponsors 25-30% of shares for minimal investment
Poor valuation process: SPACs that don't negotiate properly can overpay or underpay
Weak sponsor background: Celebrity or inexperienced sponsors who add no strategic value
Complex warrant structures: Complicated terms that dilute existing shareholders
How to Evaluate SPAC Quality:
Sponsor gets reasonable promote (15-20%, not 30%+)
Experienced sponsor with relevant industry expertise
Clear, transparent fee structure with no hidden costs
Negotiated valuation based on strategic value, not desperation
Bottom Line: Good SPACs are still better than traditional IPOs for employee value, but choose sponsors carefully.
Option 3: Extended Private with Real Employee Liquidity
The Strategy: Stay private longer but create genuine employee liquidity opportunities.
Critical Implementation:
Annual tender offers priced at fair market value (not discounted IPO prices)
Partner with growth equity firms to buy employee shares
Ensure employees have same liquidity access as founders
Warning: Don't stay private without creating employee liquidity—you'll lose your team
Employee Protection Programs:
10-20% liquidity opportunities every 2-3 years
Equity refresh grants to offset dilution
Extended exercise periods (7-10 years, not 90 days)
Transparent communication about exit strategy and timeline
What Founders Must Do Now
Immediate Actions (Next 30 Days)
Reject Traditional IPO as Default Path: Circle proves the system is designed to steal from you and your team
Research Strategic Acquirers: Build relationships with companies that would pay fair value for what you've built
Evaluate SPAC Sponsors: Find sponsors who offer transparent, negotiated terms instead of hidden extraction
Strategic Implementation (Next 90 Days)
Build M&A Optionality: Create strategic value that drives acquisition premiums
Design Employee Liquidity Programs: Don't make your team wait for bank-controlled IPO to see returns
Educate Your Team: Help employees understand why traditional IPOs systematically undervalue their contributions
The Bottom Line
Circle's IPO represents the most extreme example of investment bank value theft in modern history. $3B extracted from the people who built the company and given to random bank clients who contributed nothing.
This is not "market efficiency"—it's systematic robbery disguised as financial services.
Smart founders are rejecting this broken system:
M&A captures strategic value without bank extraction schemes
SPACs provide transparent terms instead of hidden wealth transfers
Extended private strategies with employee liquidity preserve 100% of value creation
Your company's value belongs to the people who built it—not investment bank clients.
The Circle example should be the last straw. Choose exit strategies that reward value creators, not value extractors.
Wayne
Founder & CEO - RVNU
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