Voyager Digital (OTCQX:VYGVF) shares are dropping over 60% in Wednesday morning trading to its lowest since June 2020 after revealing loan exposure of more than $660M to struggling crypto hedge fund Three Arrows Capital.
The crypto broker said it may issue a "notice of default" to 3AC if it fails to make a loan repayment.
Moreover, Voyager Digital (OTCQX:VYGVF) disclosed that its exposure to 3AC, which has failed to meet margin calls over the past week as its crypto wagers turned sour amid turbulent market conditions, consists $350M in USD Coin (USDC-USD), a stablecoin pegged to the U.S. dollar, and 15,250 bitcoins (BTC-USD) ($314.2M) for a total of $664.2M.
Furthermore, Voyager Digital (OTCQX:VYGVF) had initially asked for a repayment of $25M USD Coin (USDC-USD) by June 24, and then requested repayment of the entire balance of USDC and bitcoin (BTC-USD) by June 27, according to the update. The troubled fund may have a tough time making those repayments as it explores asset sales amid liquidity challenges.
"Neither of these amounts has been repaid, and failure by 3AC to repay either requested amount by these specified dates will constitute an event of default," Voyager said, adding that it's unable to assess at this point the amount it will be able to recover from Dubai-based 3AC.
In turn, BTIG analyst Mark Palmer has downgraded Voyager Digital (OTCQX:VYGVF) to Neutral from Buy and removed his price target of $15 per share.
"When we asked VOYG management about the extent to which the company’s loan exposure is collateralized and whether it had hedges or other risk management tools against the exposure in place, they directed us to their public commentary. In the absence of this critical information, our ability to assess the situation and to value the stock is limited," Palmer wrote in a note.
Separately, Voyager Digital (OTCQX:VYGVF) has been extended credit facilities with Alameda, a quant trading shop founded by FTX CEO Sam-Bankman Fried, for a $200M cash and USD Coin (USDC-USD) revolver and a 15K bitcoin (BTC-USD) revolver. The proceeds are intended to be used to safeguard consumer assets amid heightened market volatility, the company said.
Previously, (June 9) SA's Quant Rating warned investors that VYGVF is at high risk of performing badly due to decelerating momentum and negative EPS revisions.