After the financial report announcement of "share sale," "the first stock of stablecoin" Circle plummeted 6% in after-hours trading

Less than a day after releasing an impressive financial report, Circle, the "first stock of stablecoins" in the U.S., doused the market with a bucket of "cold water."

On Tuesday after the U.S. stock market closed, Circle, the world's second-largest stablecoin issuer, saw its stock price plummet over 6%, after the company and its shareholders, including co-founder and CEO Jeremy Allaire, announced a joint sale of 10 million shares.

According to documents submitted to the U.S. Securities and Exchange Commission on Tuesday, Circle plans to issue 2 million new shares, while existing shareholders will sell 8 million shares. Based on Tuesday's closing price of $163.21, this stock sale will raise $1.63 billion.

According to Bloomberg, citing informed sources, the pricing for this stock issuance is expected to be completed on the evening of Thursday, August 14. The stock issuance is jointly underwritten by JP Morgan, Citigroup, and Goldman Sachs.

After the news was announced, Circle's stock price fell over 6% in after-hours trading in New York to $153. Compared to its historical high of $299, this represents a nearly 50% decline, but it is still about five times higher than the initial public offering (IPO) price of $31.

This stock issuance comes just two months after Circle's successful IPO in June. During this period, driven by favorable factors such as the signing of stablecoin regulatory legislation, its stock price has surged over 426%.

Timing Raises Market Doubts

Circle's decision to initiate the stock issuance immediately after the financial report release is quite delicate. An article from Wall Street Insight noted that the company's recently released Q2 financial report showed strong performance in its core business, with total revenue increasing by 53% year-on-year to $658 million, and the circulation of the USDC stablecoin surging 90% year-on-year to $61.3 billion.

However, before investors could fully digest the positive news from the financial report, the management announced a large-scale stock issuance plan, which the market reacted negatively to. Particularly, the scale of existing shareholders selling 8 million shares far exceeds the company's own issuance of 2 million shares, effectively increasing the supply of circulating shares in the market, which may exacerbate investors' concerns about insiders cashing out.

Improved Regulatory Environment, But Challenges Remain

The signing of the GENIUS Act previously established a federal regulatory framework for U.S. payment stablecoins, which is a significant benefit for Circle's long-term compliance status. As the first stablecoin issuer to achieve regulatory compliance, Circle's competitive advantage in the new regulatory environment may be further solidified.

However, Circle also admitted in its financial report risk disclosures that it faces numerous challenges: intensified competition from yield-bearing digital assets, potential risks of stablecoin runs, risks of technological disruptions, and an evolving regulatory environment