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Could Messaging App Telegram Be The Next Best SPAC?

I have no inside knowledge of a potential stock listing of the popular anti-Whatsapp messaging app, Telegram. But I know this much, judging by most people I talk to, especially crypto investors, if Telegram ever went public, people would gobble it up. I know I would. I’m waiting for it.

So is Sergei Sergienko, who claims he owns $800,000 of Telegram’s pre-initial coin offering (ICO) tokens. “If Telegram does a SPAC IPO, there would be demand for this issue. It would probably outstrip the interest we saw during the ICO. Why? Because as of right now Telegram looks like a liberal application that can accept anyone – right after WhatsApp and others have turn on the censorship,” he says.

Last week, we got word that cryptocurrency exchange Coinbase is doing an initial public offering. Millions of people will buy it. It will be oversubscribed by a factor of three at least.

Coinbase is not doing a SPAC listing, the new Special Purpose Acquisition Vehicle that’s been popular over the last two years. I bought the Fisker SPAC this summer and am very happy with it.

Also last week, Jim Cramer got behind two things unheard of at CNBC, let alone from an old school, mainstreamer like Cramer: Bitcoin and SPACs.

If Telegram ever did a SPAC, it will be the hottest one in the world at the time. Please think about it, Telegram.

A special purpose acquisitions company is essentially a holding company set up by investors with the sole purpose of raising money through an IPO to put to work in another company, though the “other company” is the real target of investors. Like Fisker, for example. Sometimes a SPAC has no commercial operations, just like a holding company itself. It makes no products and does not sell anything; its holdings do.

“The performance of SPACs appears highly speculative, and its surge in popularity may be another sign of recent market ebullience,” says Jason Pride, Chief Investment Officer of Private Wealth for Glenmede. “Investors should tread carefully with SPACs, as costs and dilution post-merger may be larger than those borne via traditional IPOs.”

Telegram Taps the Markets?

Where is this Telegram IPO idea coming from? Word is that Telegram is looking to raise a billion dollars in the bond market. According to trustworthy reports in the Russian press, Telegram hopes to raise $1 billion with a convertible bond private placement.

The messaging app created by Russian born and self-exiled Pavel Durov has seen its user numbers surge by millions over the past month after celebs promoted it following privacy rules changes for WhatsApp and scores of Twitter users fleeing the platform after ex-President Trump got suspended. This made Telegram the most downloaded mobile app in the world at the start of the year.

The bond story was scooped first by business daily Kommersant in Moscow about two weeks ago. Kommersant reports that bondholders would then be able to convert those notes into equity if a Telegram IPO takes places within five years. This has led the Russian rumor bill to think out loud about a Telegram IPO, even though everyone knows it won’t be listed in Moscow.

The convertible bond offering opens up the door to an eventual IPO, if that ever happens, which of course Telegram will not discuss. I am not expecting an IPO anytime soon (maybe never), but at a minimum — this idea of tapping the bond market for the first time shows how big Telegram has become at the expense of the legacy messaging apps.

Telegram once got investors on board with its cryptocurrency project called the Telegram Open Network (TON). They raised $1.7 billion from investors in their 2018 ICO bid for TON, but the deal was killed by the SEC and the company is now required to give back the money and pay a fine. This is probably why Durov is looking to raise capital. He could pay that all back in spades with an IPO within five years.

Telegram says its considering different options and the investor rumor mill hopes one of them is a SPAC IPO.

“The fact that Telegram is thinking of issuing bonds is mega-cool,” says Sergienko. “It is a real sign of company maturity and its acceptability from mainstream users.” If they ever did go public, he says he would be a buyer.

For what it’s worth, Durov said that for a messenger app, obtaining a loan (through the bond offer) is one of the possible ways “to remain completely independent and true to our values, “while implementing a monetization strategy.” That’s what the ICO was largely all about, too.

The Durov Tales: A Crypto Jedi Almost Taken Out By Darth Vader

Durov’s story is impressive. He is an icon in Russia. There are murals of Durov in Russia. He is seen as a hero for standing against the Russian intelligence agencies. That might as well be viewed as a battle against Vladimir Putin himself.

Durov has left the corporate battlefield of Russia and is believed to divide his time between some Caribbean island and the United Arab Emirates.

His bout with the Russian intel service got Telgram banned from Russia, though that ban is useless thanks to virtual private networks. Every Russian I know is on Telegram.

Durov also survived a Russian-style corporate takeover. An alleged Kremlin proxy investment vehicle called UCP accumulated 48% in Durov-founded Russian internet-company Vkontakte, a social media company like Facebook.

UCP was rumored to be linked to Igor Sechin, sometimes referred to as the Russian Darth Vader. UCP had supposedly tried to wrestle Telegram from Durov, who was known to be developing the Telegram app at the time.

A shareholder conflict at Vkontakte resulted in the ousting of Durov as the CEO and his ultimate exile. According to Durov’s lawsuit against UCP, UCP “illegally gained access to American trading companies”, which owned American trademarks Telegram and Telegraph in the United States.

But the attempt to take control away from Durov failed mainly thanks to the help of Alisher Usmanov, the Uzbek-born Russian metals & telecoms magnate and an early stage investor in Facebook and Alibaba. Sticking with the Star Wars comparisons, Usmanov is president of the International Fencing Federation. It’s pre-light saber.

Usmanov and his former business partner, Ivan Tavrin, provided legal support to Durov during his fight with UCP, a fight that may have ultimately led to Telegram’s IP being owned by someone else.

In 2014, to defend Telegram, Durov sold his stake in Vkontakte to Tavrin. Usmanov and Tavrin then made a deal with UCP protecting Durov from UCP’s further claims on Telegram, which is another tale in the Durov mythology.

Durov was able to exit Vkontakte and retain full control of Telegram. Durov is a fighter for Telegram, and has made himself a rockstar in the crypto community. He’s like the Elon Musk of messaging apps, only a lot quieter.

His narrow escape made Telegram what it is today, one of the best known messaging apps in the world. His company’s bonds will be oversubscribed in a heartbeat, so would an IPO.

If his monetization plan proves successful, without selling users’ data like Facebook does, then Telegram’s positioning as a secure alternative to legacy social media will make it as interesting an investment case as Coinbase.

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