Arca strongly objected to the Phantom Trope proposal of SushiSwap, Arca CIO calling it “the value-destroying”

Cryptocurrency asset management company Arca has strongly opposed SushiSwap’s Phantom Trope proposal. Earlier last week, SushiSwap made a proposal for the Phantom Trope as part of its overall Treasury Diversification plan.


CIO of digital asset investment management firm Arca, Jeff Dorman

Arca rebuttal SushiSwap Phantom Trope Proposal

Phantom Troupe is considered a strategic raise, aiming to use 51 million SUSHI in the SushiSwap Treasury for institutional investors. Community member 0xMaxi says that the move will help solidify SushiSwap’s position as a DeFi green chip.

However, Arca, one of the largest SUSHI holders withholds 7.5% of the circulating supply, strongly objected. In it, Jeff Dorman, CIO at Arca called it “the value-destroying Phantom Trope proposal for SUSHI.”

“Arca will backstop a new proposal with a first tranche bid price 31% above current TWAP price”, he tweeted.

Arca believes that flooding more coins in the market just to woo institutional players will evaluate the price of SUSHI which isn’t good for the existing investors. Furthermore, the crypto investment firm believes that SUSHI is already undervalued at the current price.

In his recent declaration, the Arca CIO stated: “Sushiswap does not need money, as indicated by 0xMaki himself. We agree that there is merit to diversifying the Treasury, but not at current depressed prices, and there is no justification for the size of a $60mm raise.”

Then, despite being one of the biggest buyers of SUSHI in the secondary market, representative of Arca, Dorman said that the proposed discounts are not indicative of a vibrant growth project.

“The proposed discount and short lock-up are not indicative of a vibrant growth project like SUSHI. SUSHI is currently trading at a massive discount to its fair value, and now is absolutely not the time to be selling,” noted Dorman.

“We believe our expertise in capital markets and deal structuring can bring more economic and strategic benefit to SUSHI and its existing investors/community than the current proposal”, he added. “Some of the VCs touting their strategic benefits are selling $SUSHI into a declining low-volume market to buy this new deal at cheaper levels. In other words, this looks more like an arbitrage trade than a strategic, long-term investment.”

Then, Dorman also shared about Arca’s new proposal. In it, he said that if the SUSHI community is intent on selling from its treasury in this environment, they will be buyers at prices that are fair to the community. Calling for no further discounts, Arca is quite willing to pay above the current trading levels.

Dorman adds that the average Price-to-Sales ratio of the entire DEX market is 12.7x. If SUSHI had to trade at these levels, its actual price should be around $40. At press time, the price is at a 7% high at $7.63.

There is clearly strong demand for the SUSHI given the vibrant community, project fundamentals, and a large number of strategic investors who have expressed interest in a $60mm private round. Therefore, it is more valuable to have a diversified community of many smaller investors/users than it is to have a concentrated group of large passive investors.

Finally, Dorman said that if Arca’s proposal is accepted, they will backstop the deal with a minimum purchase of $10mm at the first offering price of $7.04. With this higher bid from Arca, SUSHI would be negligent in offering tokens below this price.

Furthermore, this proposal also saves SUSHI $22.6mm and releases 4mm fewer tokens saving SUSHI holders from additional dilution.

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