Columbus Circle Capital I: Ugly Merger, Interesting Trade

Summary CCCM’s merger with ProCap BTC values Bitcoin holdings at a steep premium, disadvantaging SPAC investors compared to direct BTC or ETF exposure. Deal structure favors preferred equity and the sponsor, leaving SPAC shareholders with less than their fair share and significant downside if BTC falls. Post-merger strategy lacks clarity on building a real operating business, and the capital structure limits flexibility to capitalize on BTC price moves. Despite long-term skepticism, CCCM offers a low-risk, short-term trade opportunity with limited downside and potential upside before the redemption deadline. This week, SPAC (special purpose acquisition company) Columbus Circle Capital Corp. I ( CCCM ) announced plans to merge with ProCap BTC LLC. As a SPAC, CCC is just a pile of cash; ProCap is essentially just a pile of Bitcoin. At the current CCCM stock price of $10.73, and the current BTC price of just over $107,000, the merger values each dollar in ProCap’s Bitcoin stash at about $1.43. Whether that’s a good deal is a matter of perspective. One view is that paying $1.43 in cash for $1 in Bitcoin is ludicrous on its face. Investors can buy Bitcoin for pretty close to $1, whether via direct ownership or an exchange-traded fund. ProCap’s structure does suggest some leverage to the BTC price, but that leverage is not guaranteed, and investors have myriad ways to gain levered exposure to Bitcoin, all of which appear to be lower-cost. The contrary view, however, is that 1.43:1 is actually a pretty good ratio for what have become known as Bitcoin treasury companies. The pioneer and the largest of the group obviously is Strategy ( MSTR ), which has an enterprise value 1.87x the value of its Bitcoin holdings. There’s some value in Strategy’s legacy software business, but at this point not much; even accounting for those operations, the premium here is in the range of 80%. Other companies (130, per the CCC/ProCap merger presentation) have executed similar strategies in Bitcoin and other coins and gotten bigger premiums; Metaplanet ( OTC:MTPLF ) is valued at nearly 5x its Bitcoin stash . The problem for ProCap, however, is that the initial response to the deal itself suggests the post-merger entity is not likely to follow the MSTR path, let alone that of Metaplanet. Meanwhile, ProCap chief executive officer Anthony Pompliano, a longtime investor (and Twitter/X personality and podcast host), has made some comments about creating an operating business here as well, but it’s not clear exactly that is supposed to be. To top it off, the structure of the capital raise beyond the SPAC cash suggests a real possibility of a wave of pre-merger redemptions. All told, it’s hard to have too much optimism about the post-merger entity here. But with CCCM stock not that far above the redemption price, there is an interesting pre-merger trade to be had, with a low-risk option on a spike in BTC and/or a return to a more optimistic outlook toward crypto treasury companies more broadly. The Deal Structure For CCCM Stock The post-merger ProCap will have $1 billion in capital, raised from three sources : CCCM/ProCap merger presentation, June 2025 The SPAC has $256 million in cash in trust, thanks to a $250 million initial public offering last month. The $517 million in equity already has been raised, with most of the funds used to buy BTC over the last two days. The convertibles will be issued at the merger close. On its face, this doesn’t seem like a bad deal: ProCap is raising $1 billion and buying just shy of 9,500 BTC (note that the presentation was based on a BTC price of $100,000). But a closer look shows that SPAC investors are being disadvantaged here. It also explains why the initial optimism toward the deal, spiked by leaked details to the Financial Times , has faded so dramatically: Data by YCharts Notably, the preferred equity is getting into the SPAC at $8 per share (each preferred stock unit converts to common stock at a 1.25x ratio ). The notes convert at $13 per share, but they’re also 2x collateralized by Bitcoin (or cash, but as seen above the post-merger ProCap will have minimal cash). Paying $10.70 For $7.50 (Or Less) Because of both the discount offered the preferred equity holder and a pretty substantial promote for Pompliano, CCCM investors wind up getting what looks like less than their fair share: CCCM/ProCap merger presentation, June 2025 In the indicative example, with the BTC price at $100,000, post-merger ProCap would be have a net asset value of $955 million ($950 million in BTC plus $5 million in cash). SPAC shareholders would get 19.7%, or $188 million; even at $10, the premium is about 1.33x. In reality, the numbers are a bit different. ProCap already has purchased 4,932 BTC this week for a total of $514 million. That leaves $436 million in cash (from the SPAC and the converts), for an NAV of $950 million, or a per-share NAV of $7.50. The current price of $10.70 is thus about a 1.43x premium. But even that is a bit inflated, because it assumes the convertibles actually convert into stock. Treat the converts as debt (as would be the case with CCCM and/or the post-merger stock below $13) and NAV is actually $715 million across 108.6 million shares. That’s a per-share figure of just $6.58, suggesting a current premium of about 63%. (It’s also an example of just how important the convertibles actually converting is to the success of the treasury plan.) Two Post-Merger Problems For Columbus Circle Capital I The structure here creates two problems assuming the merger goes through. The first is looking to the downside and upside. Even if the cash from the SPAC and the converts buys BTC at $100K (adding 4,910 BTC, essentially doubling the current stash), a move in the Bitcoin price to $80K would leave net asset value somewhere around $550 million (again, treating the converts as debt, so 108.6 million shares outstanding and $230M in net debt). Net asset value here is a little over $5; in this scenario, it’s not hard to imagine CCCM dropping below $7. In other words, the downside here is amplified even with some kind of treasury premium: a ~25% decline in Bitcoin leads to a 35%-plus drop in CCCM stock. But the converse is not necessarily true. The SPAC agreement includes “adjustment shares”, which will be issued to the sponsor and the preferred equity investors if BTC rises between now and the close. Basically, their number of shares increases by the same percentage BTC does . Imagine, for instance, BTC doubling; the share of equity owned by SPAC shareholders in the post-merger ProCap drops by half . NAV ($7.50 per share assuming conversion) only goes to about $10; at the same premium, CCCM stock would be worth less than $15. For this to work, then, the premium has to expand . In theory, post-merger this can happen (and indeed it has happened for MSTR, which has consistently outpaced Bitcoin). But part of the reason Strategy has outperformed is that it keeps adding to its Bitcoin haul on the way up. It would seem that ProCap has designs on a similar strategy (no pun intended). The issue is that the post-merger structure means that the company will have no cash to adjust its holdings. Pompliano and ProCap claim to have a workaround, however, as witnessed by the last two bullet points on this slide: CCCM/ProCap merger presentation, June 2025 The problem is that the strategy here, such as it is, is basically to buy (Bitcoin) low and sell (CCCM stock) high. In bullet point #2, “Strategically rais[ing] capital during favorable market cycles to scale our Bitcoin holdings” means that ProCap will issue equity and/or converts when the demand is there. “Tactical accumulation, including strategic dips, volatility harvesting, and programmatic purchases aligned with macro signals and capital cycles” is a long way of saying that ProCap wants to buy the coin low. Buying low and selling high perhaps can work for an expert trader. For a publicly traded company, however, it’s a much more difficult endeavor. Is ProCap going to have an at-the-market offering that just dumps shares every time the premium to BTC expands? That seems like an instantly recognizable and consistent overhang. Is it in turn going to buy every dip in BTC? That’s certainly been a smart strategy for the past 15-plus years, but, again, ProCap has to actually raise the cash to make those buys. More broadly, there’s no real evidence that Pompliano (or his associates) have the acumen to move into Bitcoin and out of the stock in a way that is accretive to shareholder value rather than investment bank and exchange fees. To be fair, Pompliano has said that ProCap will build a business on top of the Bitcoin stash. As he told CNBC in an interview : I believe that the future of these companies is going to be how do you build revenue and profit with financial services on top of that. No different than if you look at the traditional financial service firms. They have a balance sheet of dollars, and they go and they build these financial services on top that drive revenue and profit. I think that you still have to build a business on top of a big pile of Bitcoin. But there’s been zero discussion of what these “financial services” are supposed to be. Pompliano told CNBC that he and ProCap “sit at the intersection between the Internet and the Bitcoiners and the institutional world.” That’s been a good business for Pompliano personally — he himself is investing $8.5 million in the deal — but there is no real evidence that positioning will create a good business for ProCap shareholders. Owning CCCM And Not ProCap And yet, with the pullback below $11, there is an intriguing potential trade here. The merger presentation cited $256 million in trust value for the CCCM SPAC, meaning redemption value should be $10.24 per share. That suggests 4%-5% downside from the current level (the cash in trust will increase over time as interest is accrued, but investors still will be down 4%-5% relative to simply holding a money market fund or short-term Treasuries). That’s not a terrible downside given that there is some potential upside between now and when the redemption deadline for the merger arrives. A sharp rally in BTC would probably bleed over here. Meanwhile, the merger presentation points out Pompliano’s impressive online reach. At least from a Twitter/X search, Bitcoin fans seem mostly disappointed with the deal , (trading in CCCM obviously suggests the same) but Pompliano has the time and the megaphone to change sentiment. Indeed, we’ve already seen a similar trade work in another SPAC, Colombier Acquisition Corp. II ( CLBR ). CLBR too saw an early retail-driven rally (this one being more political; Donald Trump Jr. is involved with its target, GrabAGun) that faded, only to bounce back strongly. When I covered the name in February, CLBR was barely above its redemption price; it’s since gained 35%. CLBR was probably a better trade than CCCM; the structure here (particularly as the adjustment shares are understood) seems like it’s leading toward a quite high redemption rate. Given that the premium to BTC for a treasury company is based on sentiment, the early response to the merger announcement itself is a red flag longer-term. But with 4-5% downside, and the volatility inherent in anything remotely exposed to crypto, CCCM seems like an interesting trade, too — at least until shares no longer can be redeemed. After that, the outlook looks much murkier, and much worse.

Source: Seeking Alpha