The Red Flags Multiply For Tether

Reporting that Tether is blocking discounted share sales while promoting a $500 billion valuation sharpens my skepticism.

This weekend’s Bloomberg piece on Tether reads, at first glance, like another victory lap for a company that has become too big, too profitable, and too systemically important to ignore. Dig a little deeper, though, and it actually reinforces many of the same concerns I raised back in late November, when I argued that Tether’s persistent refusal to provide a full, independent audit was not just some cute, quirky cultural preference, but to me was a red warning light.

According to Bloomberg, Tether Holdings SA is exploring a stock sale that could raise as much as $20 billion and imply a valuation north of $500 billion, a level that would put it among the most valuable private companies on the planet. At the same time, Bloomberg reports that Tether recently intervened to stop at least one existing shareholder from selling stock at a steep discount, a transaction that would have valued the company closer to $280 billion based on investor materials seen by Bloomberg. Management, concerned that such sales could undermine the fundraising narrative, reportedly stepped in and made clear that these efforts would not proceed. Tether itself told Bloomberg it would be “imprudent, and indeed reckless” for investors to try to circumvent the process being run by Tier 1 investment banks.

“In other words, don’t you Hazzard boys go looking for no bid in no open market!”

That attitude alone should make any serious investor pause. When insiders want liquidity badly enough to accept a discount, while management simultaneously seeks to lock them in and float eye-watering headline valuations, it raises an uncomfortable question about what price actually clears in a free market. Liquidity problems do not always announce themselves as balance sheet crises; sometimes they show up first as disagreements over what something is really worth when cash is on the line.