Coincheck to List on Nasdaq via SPAC
On March 22, 2022, Monex Group, Inc. announced that its subsidiary Coincheck, Inc., which operates a crypto asset exchange business, will list on the U.S. Nasdaq market within the year through a merger with a Special Purpose Acquisition Company (SPAC).
It was believed that several other companies in the crypto asset industry were also considering listings on Nasdaq or the NYSE, as the Tokyo Stock Exchange has adopted a policy of not accepting listing applications from the industry. Coincheck has now emerged to lead the way.
A Complex de-SPAC Scheme
As detailed in Monex Group’s press release, for this de-SPAC, Monex Group will first establish a new corporation in the Netherlands called Coincheck Group B.V. (the “Dutch Entity”). It will then conduct a reorganization, placing an intermediate holding company under the Dutch Entity, and placing Coincheck, Inc. under that.
At the time of the de-SPAC, the intermediate holding company and the SPAC will merge. The planned scheme involves consolidating the Coincheck business (which will have merged with the SPAC) under the Dutch Entity (which will change its corporate form to Coincheck Group N.V. upon the public listing). Ultimately, the Dutch Entity will be listed on Nasdaq in place of the SPAC. As a result of this series of transactions, Monex will hold over 70% of the Dutch Entity’s shares, maintaining it as a consolidated subsidiary, while existing SPAC shareholders are expected to be allocated approximately 18.5% of the Dutch Entity.
Based on a review of the Current Report (Form 8-K) filed by the SPAC with the SEC, it is not clear whether the post-listing Dutch Entity will be classified as a “domestic issuer” or a “Foreign Private Issuer” (FPI) under SEC regulations. However, given the trouble of constructing a complex scheme involving establishing an entity in the Netherlands, it is presumed they intend to be an FPI.
If classified as a domestic issuer, the company must adopt U.S. GAAP (Generally Accepted Accounting Principles) for financial reporting. If it is an FPI, however, U.S. GAAP is not necessarily required, and adopting International Financial Reporting Standards (IFRS) also becomes possible. Monex Group currently adopts IFRS, and its subsidiary Coincheck also conducts its accounting based on IFRS.
Key Points on Accounting Standards for Crypto Assets
The accounting treatment for crypto assets is not always clear, as definitive accounting standards do not yet exist. Both U.S. GAAP and IFRS agree that crypto assets cannot be classified as cash or financial assets.
Under U.S. GAAP, the definition of inventories includes the requirement that they be “tangible.” Therefore, intangible crypto assets are not considered to meet the definition of inventories, and it is generally held that treating them as intangible assets is appropriate.
Under IFRS, however, the definition of inventories does not require tangibility. It is therefore considered possible to treat intangible crypto assets as inventories. In fact, in Monex Group’s Annual Securities Report, Coincheck’s holdings of crypto assets are accounted for as inventories, and the following explanation is provided in the notes:
“Among the crypto assets that the Group has determined it has accounting control over (including those based on consumption loan agreements with users), those held primarily for the purpose of selling in the near future to earn profits from price fluctuations or broker margins are recognized as inventories on the consolidated statement of financial position in accordance with IAS 2, ‘Inventories,’ because the Group has the ability to direct their use and obtain their economic benefits.”
In other words, the view is that because they hold crypto assets for the purpose of future sale, their business model is the same as that for commodity trading (e.t., crude oil). Therefore, it is appropriate to account for crypto assets as inventories, similar to commodity transactions.
While it is not clear whether Coincheck will ultimately adopt U.S. GAAP or continue to use IFRS, its future accounting treatment and related disclosures will likely serve as a useful reference for other companies in the industry considering a future Nasdaq listing.
For questions or consultations regarding this page, please feel free to contact us using the inquiry form below.
