M&A Rainmaker 2021

Team Sentimental Analysts

IIM Indore
Anmol Verma
Mahek Mall
 FTX: The Everything Exchange?
● FTX offers innovative products including industry-first derivatives, options, volatility Structure of FTX
products and leveraged tokens. FTX and Alameda are the central
● As an exchange, does not want to limit itself to the crypto space. entities in the FTX universe. Alameda
● It already has products in the stock and forex markets with tokenized stocks and fiat is a crypto investment firm and
markets respectively.
● It is developing its NFT space rapidly as well as prediction markets. provided the much needed liquidity
● FTX has made a conscious effort to enter the sports world with millions of dollars in the early days to FTX. FTX is a
spent on putting their names on stadiums, jerseys and even referees in the MLB. cryptocurrency exchange. FTX.com is
● However, it is also seen as foreshadowing for FTX’s inevitable entry into the sports the main version of the product
market. Since the Sports investments are primarily made in the US, it seems that available worldwide while FTX.us is
FTX.us will be in focus during this push by the company. the diluted version available in the US.

Sam Bankman-Fried and Gary Wang
founded FTX in May 2019 and raised $8
million in seed funding in August 2019.
2020
In July 2021, FTX raised $900 million at a
$18 billion valuation from over 60 investors
and Binance, a competitor divests its equity
in FTX
August, 2021
In September 2021, FTX moved their
headquarters from Hong Kong to The
Bahamas owing to clearer crypto rules
and lesser Covid restrictions..
October, 2021

2019 July, 2021 September,

In August 2020, FTX acquired In August 2021, FTX.US acquired Raised $420 million in a new
Blockfolio. Blockfolio lets you LedgerX for an undisclosed sum, a move 2021 round of funding, valuing the
add your portfolio of that’s set to expand the crypto company at $25 billion
cryptocurrencies and track their exchange’s product offerings to futures
value over time. . and options trading in the U.S

● Focus on crypto derivative products. Only exchange offering crypto derivative products in the US.
● Designed for sophisticated traders with large amounts of money involved. Industry leading leverage options of upto 20x.
COMPETITIVE ● FTX offers innovative products not found on other exchanges such as MOVE indices that track the volatility of cryptocurrencies and
ADVANTAGE leveraged tokens (such as the 3XBULL tokens) which are long positions represented by ERC-20 tokens.
● Service large swathe of locations, diversifying regional risks related to cryptocurrencies.
The Next Step: Prediction Markets
Building Sports DeFi prediction markets using fiat and crypto currencies. The basic concept of smart
Based Prediction contracts in block chain technology can be used to create markets for betting on the
Markets outcomes of real world events. The contracts expire as the real world event materializes.

Appeal to existing Thematic Unity

Evaluation Matrix Competition user base (Risk (Decentralized Cost of Acquisition
Profile) offering)

Betting Intense Yes No Very high

NFT High No Yes Moderate to high

Prediction Market Low Yes Yes Low to moderate

Strategic Rationale Economic Rationale

● Already steered into prediction markets. Founder eyeing further
expansion.
● DeFi prediction markets in line with crypto offerings.
● Emerging sector with no clear market leader. Sports betting and
NFTs have clear market leaders. Acquisition will either be beyond
FTX’s means or will involve intense competition.
● Easy to utilize blockchain capabilities.
● Lesser costs due to decentralised nature of offering.
Leverage existing capabilities in blockchain technology
● Avoids intense competition or costly acquisitions in sports
betting and NFT sectors
● Will improve ARPU due to the speculative nature of the
markets given the users are speculative crypto traders
Acquisition Target - Kalshi
● Kalshi describes itself as the exchange for trading on everything which is making opinions
an asset class
The main and only offering are event contracts, options which are based on the outcome of
The ●
real life events and expire at $0 or $1 depending on the favourability.
Company ● Currently only accepts USD and cash collaterized contracts i.e. no leveraged products
● Simplistic approach to marketing by claiming that no subject matter knowledge is required
to trade on the platform and users can “trade on what they know”.

Acquisition Rationale Valuation

● Only prediction market to have CFTC approval. Thus, it can ● Raised USD 30 Million in
operate freely in the US which is the target market given the Series A funding, led by
investments in the sports market are in the US. Sequoia Capital, which is also a
● Still at a very nascent stage, making acquisition comparatively large equity holder in FTX
cheaper and easier ● Has 2 licenses making it legal in
● Showcased ability to monetize prediction markets unlike it's 200 countries, which makes it
competitors, in talks with regulatory authorities to earn 7.5% higher in value as compared to
commission per trade. traditional SaaP companies.
Synergies between FTX and Kalshi and the Road Ahead
Potential Synergies
● LedgerX, which was acquired by FTX is the
clearinghouse used by Kalshi. This might prove
useful in integrating the two platforms
● The decentralized nature of the offering, with no
manipulation by middlemen, fits in with the
concept of decentralised cryptocurrencies upon
which FTX is based.
● The primary user base of both FTX and Kalshi
consists of risk loving individuals which means
that one firm’s products can be cross sold to the
other’s userbase, thereby bolstering the ARPU
● Kalshi’s offerings are primarily based in the US.
Therefore, acquaition by FTX will introduce it to a
wider geography, especially in south east and
east Asia, where FTX is most prominent.
Road Ahead
● Increased Emphasis on sports based
prediction markets, which have been none
existent in Kalshi’s platform until now.
● Integration with current platform and FTT
(FTX’s tokens) for easier cross selling of
offerings
● Introduction of cryptocurrency support in
Kalshi’s platform which is currently based on
fiat currencies (USD) only
● Introduction of leveraged products on
Kalshi’s platform which have become a staple
in FTX’s offerings.
● Increased push in markets besides the
United States
References
https://www.cnbc.com/2021/10/21/crypto-exchange-ftx-raises-420-million-at-25-billion.html

https://www.finsmes.com/2019/08/ftx-raises-8m-in-funding.html

https://www.marketsmedia.com/ftx-has-largest-raise-in-crypto-exchange-history/

https://www.bloomberg.com/news/articles/2021-08-31/ftx-acquires-the-first-u-s-approved-crypto-derivatives-platform

https://boxmining.com/ftx-exchange-review/

https://ftx.com

https://www.businesswire.com/news/home/20210217005285/en/Kalshi-Raises-30-Million-in-Series-A-Funding-Led-by-Sequoia

https://kalshi.com/

https://www.readthegeneralist.com/briefing/ftx-1

https://www.readthegeneralist.com/briefing/ftx-3

https://www.readthegeneralist.com/briefing/ftx-2
Thank You