A month or so ago, Strike got a $2.1 billion dollar credit-facility from Tether. Then Jack Mallers announced his support for a Strike merger with Tether-controlled Elektron Energy and XXI. But then, this happened:

Tether International — the El Salvador entity — bought all 89,106,748 of SoftBank’s Class A shares [of XXI]. SoftBank’s matching 89,106,748 Class B shares were not transferred. Per Twenty One’s Certificate of Formation, they were cancelled. The Governance Agreement that the Company, Tether Investments, Bitfinex (iFinex) and SoftBank signed at listing — the one giving SoftBank reserved rights over board size, director elections, charter amendments and identified “20% Reserved Matters” — was terminated the same day. SoftBank’s two directors, Jared Roscoe and Vikas J. Parekh, resigned.

So, I think at this point it means that Tether pretty much controls XXI on its own (the other big owner is Bitfinex, but we all know that this isn't different than Tether). Proceeding with the Strike-Elektron-XXI merger:

Of the three companies being folded into XXI, Strike is the only one with an operating business in the conventional sense. Twenty One brings the coin pile. Elektron brings a mining P&L — but the mining P&L is the BTC price written sideways, since it varies with the same input. Strike brings the Lightning payments rail, the consumer app, the B2B API: transaction fees that compound on volume, not on coin price. In a combined entity that is otherwise a Bitcoin ETF in corporate clothing, Strike is the only piece that earns its own multiple. Its last externally disclosed valuation, before the Tether credit facility, was in the low hundreds of millions in 2022. Its true value today is the subject of the S-4 — and Tether, which already controls Strike's operations via the $2.1 billion credit line it extended, is the only party that gets to set that number.

In deciding the value of Strike in the merger, it seems like Tether is sitting on all sides of the table.

Which is where the May 19 transaction matters. With one party controlling the buyer, one owning a seller, and one bankrolling the other seller, what would have disciplined the Strike valuation was the Governance Agreement. SoftBank’s “20% Reserved Matters” clause is exactly the kind of provision that requires an arm’s-length third signature on affiliated-party valuations. That clause is gone. The arm’s-length third party is gone. The party that sets Strike’s number into the merger is the same party that financed Strike with $2.1 billion and that controls the buyer absorbing it. The S-4 is the document where Class A finds out what that number is. It is, in every meaningful sense, Tether’s number.

Tether stuff is so fun!