Circle Stock, known for issuing the USDC stablecoin, has experienced a dramatic decline in value following its IPO debut. After peaking at $298 on June 23, the stock has plummeted by 68% to around $82. This significant decrease has prompted analysts to issue warnings as the company approaches the end of its lockup period.
Challenges Looming for Circle as Lockup Period Nears
Despite initially benefiting from favorable regulatory conditions for digital assets in the US, Circle faces historical challenges as it nears the end of its lockup period. This period typically restricts insiders from selling shares for 180 days post-IPO. As reported, Circle’s lockup period will expire shortly after it reveals its third-quarter earnings this Friday.
According to Dan Dolev from Mizuho, a detailed analysis of over 750 IPOs showed that companies exceeding $1 billion in market capitalization have a 58% chance of underperforming the S&P 500 in the 180 days following their lockup period, with an average decline of 2%. Moreover, firms missing revenue expectations post-IPO often suffer an average negative return of 10% compared to the S&P 500.
Revenue Concerns for Circle Stock
Mizuho suggests that Circle Stock might belong to this underperforming category due to its revenue dependency on USDC reserves held in US Treasuries, Treasury repurchase agreements, and cash. A decrease in interest rates or slower-than-expected USDC growth could negatively impact revenue streams. Dolev stated that CRCL might face downward revisions to consensus estimates in the years to come due to declining rates and increasing distribution costs.
Is Circle Stock a Buy-Low Opportunity?
Although Circle exceeded consensus estimates for both revenue and earnings in its recent report, the looming lockup expiration has exerted downward pressure on its stock. Despite this, JP Morgan has issued a double-upgrade for Circle Stock, raising its rating from Underweight to Overweight and increasing its price target from $94 to $100. The bank highlights the growing acceptance of stablecoins, with USDC as a leader.
JP Morgan analyst Kenneth Worthington views the current situation as a potential “buy-low opportunity,” suggesting that the stock’s decline may present future upside potential, with prices possibly below the December 2026 target.
In conclusion, while Circle Stock faces immediate challenges, its long-term potential remains appealing to some investors. As the lockup period concludes, market behavior will be closely monitored.
