Cryptocurrency and FX exchange LMAX Group has received a valuation of $1bn, after selling a 30% stake in the company to US private equity group JC Flowers.
The deal was part of a secondary share sale that saw LMAX founder and chief executive David Mercer and members of senior management sell a portion of their existing shares in the business, for a total cash consideration of $300m.
JC Flowers, which is helmed by former Goldman Sachs partner Chris Flowers, will take a presence on the London-headquartered LMAX’s board and help push the firm’s expansion into the US and Asia.
Institutional investors have swooped in on the cryptocurrency sector, ramping up interest in digital assets through banks such as Goldman Sachs and Morgan Stanley despite their increased volatility.
Mercer said the firm’s crypto exchange LMAX Digital is now the world’s second-largest bitcoin exchange by volume, recently trading as much as $6.6bn a day in May.
“It’s a strategic sale for us,” Mercer told Financial News in a 15 July call, following the announcement of the stake.
“We wanted to bring a like-minded partner onto our board, [and] they share our vision of creating the preeminent FX and crypto exchange group in the world. I think they can assist us with their network, their connectivity, their institutionalisation and specific know-how in the financial services space.”
“We have 500 [institutional clients] so we’re squarely trying to build out that institutional marketplace,” said Mercer. “Crypto is important to us, but it’s still a minority of our business — it represented 11% of our volumes in the first half and about a third of our revenues.”
“I’m very sure that institutions will just add this asset class [bitcoin] to what they’re trading,” he added, noting that 40% of firms using LMAX Digital also trade assets on one of the firm’s other exchanges. “That’s what I’m seeing under the hood at the moment.”
The new price tag makes LMAX the newest addition to the UK’s herd of unicorn companies — privately-held firms valued at $1bn or above — alongside the likes of fintech startups Revolut, Monzo and Starling Bank.
Mercer said LMAX has no plans to seek an exit either publicly or privately in the near future, with the deal acting as “a stepping stone” for future growth.
“LMAX Group is an exciting and well-respected company with a leading position in a market with great potential, making it a highly compelling opportunity for our firm,” said Flowers in a statement.
“David and his management team have driven considerable international growth in recent years, and we look forward to supporting them as they continue to expand their support of the world’s top institutional market actors.”
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