Fold Holdings, Inc. Initial Public Offering Released - What you need to know

Fold Holdings, Inc. Investor Report Summary

Company Overview Fold Holdings, Inc. is a bitcoin financial services company founded in 2019, focused on expanding access to bitcoin through consumer financial products, including debit cards, rewards, and trading platforms. In February 2025, Fold completed a business combination with FTAC Emerald Acquisition Corp., with its common stock now listed on Nasdaq under the ticker “FLD”. The company operates primarily in the U.S. and partners with key financial institutions including Sutton Bank, BitGo, and Fortress Trust for banking and custody services.

Key Financial Metrics

Year Ended December 31, 2024
- Revenues, net: $23.8 million (up 10% from $21.5 million in 2023)
- Banking and payment revenues: $23.4 million, up 10%
- Operating expenses: $29.6 million (up 8%)
- Banking and payment costs: $22.5 million
- Custody and trading costs: $0.23 million
- Compensation and benefits: $3.2 million (down 13%)
- Professional fees: $1.86 million (up from $0.42 million)
- Operating loss: $(5.8) million
- Net loss: $(65.1) million (including significant non-cash fair value adjustments on SAFEs)
- Net cash used in operating activities: $(3.3) million
- Cash and cash equivalents (12/31/24): $18.3 million
- Total assets (12/31/24): $125.7 million
- Liabilities: $193.5 million (primarily from SAFEs and convertible notes; $171.1 million in SAFEs, $20.0 million in convertible notes at year end)
- Digital assets (bitcoin) held (12/31/24): $102.1 million (1,094 BTC), with $93.6 million in investment treasury and $8.6 million in rewards treasury

Three Months Ended March 31, 2025
- Revenues, net: $7.1 million (44% growth Y/Y from $4.9 million 3M/2024)
- Operating expenses: $16.6 million (up from $5.8 million)
- Net loss: $(48.9) million (including $15.6 million loss on digital assets, $6.5 million loss on SAFEs, $6.5 million on convertible note fair value, and $9.6 million convertible note issuance costs)
- Adjusted EBITDA (Non-GAAP): $(4.2) million
- Cash and cash equivalents (3/31/25): $11.7 million
- Bitcoin treasury (3/31/25): 1,579 BTC ($130.3 million market value)
- Debt principal due (3/31/25): $66.3 million (two convertible notes)

Operational Metrics - Total transaction volume processed since inception through 3/31/2025: ~$2.8 billion
- Active accounts as of 3/31/25: >609,000 (added 17,000 new actives in Q1 2025)
- Verified accounts as of 3/31/25: >76,000
- Continued growth in customer base and engagement driven by new product launches (e.g. Bitcoin Rewards Credit Card, Gift Cards)

Capital Raising and Share Information - Recent capital raises via SAFEs, convertible notes, and facility agreements.
- Pending Equity Purchase Facility with SZOP: up to $250 million in aggregate gross proceeds; up to 9,282,287 shares may be issued for resale, with potential for shareholder dilution.
- 46,716,520 shares outstanding as of July 10, 2025, to rise to 55,998,807 post-offering (if maximum shares sold).
- Substantial warrant overhang: 15,099,378 outstanding warrants (average exercise price $10.24)

Key Risks

1. Shareholder Dilution and Facility Risk:

   • Sale of stock to SZOP and exercise of warrants could significantly dilute existing shareholders. (9.3 million shares may be issued under the purchase facility, which is up to 19.99% of current shares.)
   • No guarantee of access to full $250 million facility; sales dependent on market price and trading volumes.

2. Operating Losses, Cash Burn, and Funding Needs:

   • Significant net losses ($65.1 million in FY 2024 and $48.9 million in Q1 2025) driven by non-cash expense on SAFEs and volatile bitcoin valuation adjustments.
   • Negative cash flow from operations; continued need for additional capital; restrictive debt covenants.

3. Bitcoin Price and Volatility Exposure:

   • Treasury and customer rewards liabilities directly tied to bitcoin market prices; $130.3 million in bitcoin at March 31, 2025, subject to loss from price declines.
   • Q1 2025: $15.6 million loss on digital assets.

4. Regulatory Uncertainty:

   • Digital asset services face evolving regulatory scrutiny (state, federal, and global). Recent events (e.g., Synapse Financial bankruptcy, heightened bank partner regulatory scrutiny) may increase costs or restrict growth.
   • Fold operates as a non-bank financial service, partners must maintain compliance.

5. Counterparty & Custody Risks:

   • Reliance on Sutton Bank for cash custody and Fortress/BitGo for bitcoin custody. As of year-end 2024, 99%+ of proprietary bitcoin was held at BitGo; customer bitcoin split among Fortress and BitGo.
   • Insolvency of, or security failure by, partners would directly impact customer assets.

6. Competitive Pressure:

   • Significant competition from both fintech incumbents and new entrants with more resources or greater regulatory flexibility.
   • Recent product launches by competitors in rewards and bitcoin services may affect growth prospects.

7. Technological and Security Risks:

   • Exposure to cyberattacks, data breaches, and loss or theft of bitcoin private keys.
     
   • Significant resources required for ongoing software development and compliance with privacy laws.

8. Concentration & Customer Demand:

   • Success highly dependent on maintaining and growing the active verified user base; loss of customer engagement or product dissatisfaction could impair revenues.

Management Discussion and Outlook

• Growth Initiatives:

  • Continued focus on customer base expansion, product innovation (Bitcoin Rewards Credit Card, Gift Card, enhancements to custody and trading).
  • Investment in product and marketing to stimulate organic and referral-based growth.

• Bitcoin Treasury Strategy:

  • Accumulation of significant bitcoin reserves for both investment and rewards fulfillment.
    
  • As of 3/31/25, 1,579 BTC in treasury; treasury assets provide potential upside but increase exposure to bitcoin price swings.

• Liquidity and Capital Resources:

  • $11.7 million cash at 3/31/25; $130.3 million in bitcoin; $66.3 million debt principal due.
    
  • Ongoing need for external financing. Company expects existing resources, plus access to facilities and capital markets, to support near-term operations.

• Expense Management:

  • Notable increase in professional fees due to transaction and audit expenses. Compensation expenses expected to rise in 2025 with new hires for product launches.

• Accounting and Non-GAAP Metrics:

  • Adjusted EBITDA for Q1 2025 at $(4.2) million.
  • Accounting treatment of SAFEs, convertible notes, and bitcoin assets significantly affects reported losses; ongoing fair value remeasurements add volatility.

Capital Structure and Ownership

• Large shareholders include Thesis, Inc. (8.84%), Fulgur Frontier Capital LP (14.02%), and Craft Ventures II, L.P. (7.80%).
  
• Executive and director group collectively owns 27.26% of outstanding equity.

Conclusion

Fold Holdings offers unique exposure to the bitcoin-centric retail financial services market with strong product momentum and asset growth. Investors should weigh growth potential against material risks, namely bitcoin price dependence, operating losses, regulatory uncertainty, and dilution from convertible instruments and warrant overhang. Ongoing capital needs and reliance on third-party custodians underline the importance of frequent financial and operational monitoring.

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