This announcement contains information which, prior to its disclosure, was inside information as stipulated under Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310 (as amended). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

Press release

22 May 2024

Phoenix Digital Assets PLC

("Phoenix" or "the Company")

Proposed Tender Offer to purchase Ordinary Shares for up to £33,687,500 at a fixed price of 5.39p per Ordinary Share

Phoenix Digital Assets PLC (AQSE: PNIX), an investment firm, previously announced that it intended to return value to shareholders at the latest following the Bitcoin halving in April 2024 and that this would be achieved by purchasing its own ordinary shares of £0.001 each ("Ordinary Shares") through a tender offer at an amount equal to the Net Asset Value per share as announced by the Company on a Regulatory Information Service from time to time ("Tender Offer").

The Company is pleased to confirm the commencement of the Tender Offer.

Highlights

Notice of General Meeting

Notice is given that the General Meeting of the members of Phoenix Digital Assets PLC will be held at the offices of Fladgate LLP, 16 Great Queen Street, London WC2B 5DG on 11 June 2024 at 3.00 p.m. to consider and, if thought fit, pass ordinary resolutions to waive the requirements of Rule 9 of the Takeover Code. The resolutions will be taken on a poll of Independent Shareholders.

Jonathan Bixby, Chairman of Phoenix, commented: "The Board has consistently endeavoured to maximise shareholder value, and we have been highly successful, correctly predicting the fall in cryptocurrency prices in November 2022, then redeploying our capital to fully capture the buoyant cryptocurrency prices in early 2024. This Tender Offer is a means of returning this value to shareholders and safeguarding the future of Phoenix as we continue our strategic aim of becoming the premier large cap crypto currency fund in the UK."

Further details of the Tender Offer are set out in the annex to this announcement.

Shareholders should take no action until they receive the circular, form of acceptance and notice.

The Directors of Phoenix Digital Assets PLC accept responsibility for the contents of this announcement.

For further information please contact:

About Phoenix

Phoenix Digital Assets PLC invests in a diversified portfolio of cryptocurrency, and/or in companies or funds which have exposure to NFT or blockchain technology. The Company's leadership team have an extensive track record in the cryptocurrency sector and previously founded Argo Blockchain PLC, a global crypto miner. Phoenix is headquartered in London, UK, and its shares are listed on the Aquis Stock Exchange Growth Market under the ticker symbol PNIX.  https://www.getphoenix.co.uk

Important notes

This announcement does not constitute or form part of an offer or invitation, or a solicitation of any offer or invitation, to purchase any Ordinary Shares or other securities.

The full terms and conditions of the Tender Offer are set out in the Tender Offer circular, which shareholders are advised to read in full.

Any response to the Tender Offer should be made only on the basis of the information in the Tender Offer circular.

This announcement may contain, or have incorporated by reference into it, 'forward-looking  statements' with respect to certain of the Company's plans and its goals and expectations relating to its future financial condition, performance, results, strategy and objectives.

These forward-looking statements are not guarantees or predictions of future performance, may be based on a number of assumptions (which may or may not themselves prove to be correct), and, by their nature, involve known and unknown risks, uncertainties and other factors, including the factors set out this announcement, many of which are beyond the Company's control, and which may cause the actual results to differ materially from those expressed or implied in the statements contained in this announcement. The Company's actual results of operations, financial condition and the development of the business sectors in which the Company operates may differ materially from those expressed or implied in any forward-looking statement contained in this announcement due to certain factors including, but not limited to, domestic and global economic and business conditions, market-related risks pertaining to the sectors in which the Company operates, the policies and actions of regulatory authorities, geopolitical developments, market developments, disruption to the availability, confidentiality or integrity of the Company's information technology, digital systems and data (or those of its suppliers and partners), the impact of competition, technological development, inflation, deflation, foreign currency exchange rates, the timing, impact and other uncertainties of any future acquisitions, combinations or divestments within relevant industries, as well as the impact of tax and other legislation and other regulations in the jurisdictions in which the Company operates. In addition, even if the Company's actual results of operations, financial condition and the development of the business sectors in which it operates are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods.  Recipients of this announcement are cautioned not to put undue reliance on forward-looking statements.

None of the Company, nor any of its officers, advisers or any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur, in part or in whole, and, other than as required by applicable law, undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, provided that such forward-looking statements will be publicly updated if required by applicable law or regulation.

Statements of the intentions of the Company's directors reflect the present intentions of the directors as at the date of this announcement and may be subject to change as the composition of the board of directors alters, or as circumstances require. Except as required by applicable law or regulation the Company disclaims any obligation or undertaking to update or revise any forward-looking statement in this announcement.

ANNEX

1.       INTRODUCTION

The Board announced today that the Company proposes to make a capital return of up to £33,687,500 by way of a tender offer. The Tender Offer will be conducted at a fixed price of 5.39 pence per Ordinary Share. If the maximum number of shares under the Tender Offer are tendered this would result in the purchase of approximately 57.86% of the Company's current issued share capital.

The Tender Offer is conditional upon the passing by Independent Shareholders at the General Meeting of the Tender Offer Waiver Resolution.

2.       BACKGROUND TO AND REASONS FOR THE TENDER OFFER

The Company was admitted to trading on AQSE on 16 April 2021 when it raised £35,000,000 (before expenses).  As at 20 March 2023 the Company had a net asset value of £36.3 million (3.61p per share) including £28.87 million (2.87p per share) in liquid crypto-assets but a bid price per share representing a 58% discount to such net asset value.  The Board was then and remains of the opinion that the Ordinary Shares will continue trading at a discount to the Company's net asset value in the short to medium term and therefore it is appropriate to offer Shareholders an opportunity to exit. 

Accordingly, on 20 March 2023, the Company announced that:

·  it intended to return value to shareholders at the latest following the Bitcoin halving then anticipated to take place in April 2024; and

·  it intended to achieve this by purchasing its own shares through a tender offer under which shareholders would have the opportunity to sell shares on a pro-rata basis.

On 11 April 2023, the Company announced that the tender offer would be for a maximum of 857,142,857 ordinary shares of £0.001 each and that the tender offer price would be a maximum of whichever is the greater of 3.5p per share and an amount equal to the Net Asset Value per share as announced by the Company on a Regulatory Information Service from time to time.

On 26 May 2023, the Company's shareholders in general meeting approved the cancellation of the Company's share premium account and authorised the directors to buyback shares for the purpose of section 701 of the Companies Act 2006.  Subsequently, the High Court of England and Wales confirmed the reduction of the Company's share capital by way of cancellation of its share premium account.

On 21 May 2024, the Company had unaudited cryptocurrency and stablecoin assets with a valuation of £69,831,000 (6.46p per share) and unaudited cryptocurrency, stablecoin, cash and equity investments with a valuation of £73,001,000 (6.76p per share) comprising:

The cryptocurrency and stablecoin assets comprised:

Accordingly, the Board has set the Tender Price at 5.39p per Ordinary Share, a premium of 35% to the closing middle market price of an Ordinary Share on AQSE on 21 May 2024, being the latest practicable date before the publication of this announcement.

Shareholders should note that the unrealised profits on the Company's cryptocurrency and stablecoin holdings will be realised during the Tender Offer, resulting in a tax liability for the Company equating to 1.10p per share. Shareholders should also note that the Directors have calculated NAV after excluding the Company's illiquid investments.

The closing middle market price of an Ordinary Share on AQSE on the Latest Practicable Date was 4.0p which represents a 38% discount to the Company's latest unaudited cryptocurrency and stablecoin valuation per share, a 41% discount to its latest unaudited total net asset value per share and a 29% discount to its latest unaudited total net asset value after the expected tax charge.

On 21 May 2024, the Company liquidated investments to generate £40,571,083 in order to fund the Tender.  Assuming full acceptance of the Tender Offer, the Company expects to hold the following upon completion of Tender Offer:

The cryptocurrency and stablecoin assets post Tender Offer will comprise (using valuations at the Latest Practicable Date:

3.       THE TENDER OFFER

Under the Tender Offer, FSCF (acting as agent for the Company) will offer to purchase up to 625,000,000 Ordinary Shares representing 57.86% of the current issued Ordinary Shares, at the Tender Price.

The Tender Offer is conditional upon the passing of the Tender Offer Waiver Resolution.

The Tender Offer will be open to all Qualifying Shareholders, being Shareholders on the Register on the Record Date, who are not subject to the securities laws of a Restricted Jurisdiction. The Tender Offer will close at 1.00 p.m. on 13 June 2024 and tenders received after that time will not be accepted unless otherwise approved by FSCF (in consultation with the Company).

Qualifying Shareholders may participate in the Tender Offer by tendering a proportion of their registered holdings of Ordinary Shares.  Each Qualifying Shareholder will be entitled to sell up to 57.86% of the number of Ordinary Shares registered in their name on the Record Date, rounded down to the nearest whole number of Ordinary Shares.  This is referred to as a Shareholder's Basic Entitlement. All Ordinary Shares validly tendered by any Qualifying Shareholder up to their Basic Entitlement will be accepted in full.

The Tender Offer will also permit Qualifying Shareholders with the opportunity to sell more than their Basic Entitlement (Excess Tenders) to the extent that other Qualifying Shareholders sell less than their Basic Entitlement or do not tender any Ordinary Shares (thereby creating Excess Capacity).  If the number of Ordinary Shares validly tendered is less than 625,000,000, Excess Tenders will be accepted in proportion to the number of Ordinary Shares tendered so that the total number of Ordinary Shares purchased pursuant to the Tender Offer will not exceed 625,000,000.

To the extent that the aggregate Excess Tenders exceeds Excess Capacity, Excess Tenders will be scaled down pro-rata to the total number of Ordinary Shares so tendered by that Qualifying Shareholder.

Qualifying Shareholders who hold their Ordinary Shares in certificated form who wish to participate in the Tender Offer must return a completed Tender Form, together with any shares certificate(s) and/or other document(s) of title so as to be received by the Receiving Agent by no later than 1.00 p.m. on 13 June 2024. Qualifying Shareholders who hold their Ordinary Shares in uncertificated form (that is, in CREST) who wish to participate in the Tender Offer should not complete a Tender Form but should submit TTE instructions electronically through CREST.

Once submitted, a Tender Form and/or a TTE instruction (as appropriate) is irrevocable and cannot be withdrawn. Qualifying Shareholders should note that, once tendered, Ordinary Shares may not be sold, transferred, charged or otherwise disposed of.

Full details of the Tender Offer, including the terms and conditions on which it is made, are set out in Part 3 of the Tender Offer circular and, for Shareholders who hold their Ordinary Shares in certificated form, on the Tender Form.

The Directors are not making a recommendation to Shareholders to sell or tender their Ordinary Shares. Shareholders are not obliged to tender any Ordinary Shares and Shareholders who wish to retain all of their investment in the Company should not return a Tender Form or submit a TTE Instruction.

4.       OVERSEAS SHAREHOLDERS

The attention of Shareholders who are not resident in the United Kingdom is drawn to paragraph 7 of Part 3 of the Tender Offer circular headed "Overseas Shareholders".

5.       TAXATION

A summary of the taxation consequences of the Tender Offer for UK resident Shareholders is set out in Part 4 of the Tender Offer circular.  Shareholders are strongly advised to obtain independent tax advice regarding their own tax position.

6.       TAkeover Code

Introduction

Under Rule 9 of the Takeover Code, any person who acquires an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert with him are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all the remaining Shareholders to acquire their shares at the highest price paid by that person (or any persons acting in concert with them) for shares in the company within the preceding 12 months.

Rule 9 of the Takeover Code also provides that any person, together with persons acting in concert with that person, who is interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of a company to which the Takeover Code applies but does not hold more than 50 per cent. of such voting rights will be unable, without the Panel's consent, to acquire, either individually or together, any interest in any further voting rights in the company without being required to make a general offer to shareholders of that company to acquire their shares at the highest price paid by that person (or any persons acting in concert with them) for shares in the company within the preceding 12 months. Persons holding more than 50 per cent. of the voting rights of a company which is subject to the Takeover Code will normally have freedom to acquire further shares without being required to make a general offer to shareholders of that company.

Under Rule 37 of the Takeover Code, when a company redeems or purchases its own voting shares, any resulting increase in the percentage of shares carrying voting rights in which a person or group of persons acting in concert is interested will be treated as an acquisition for the purpose of Rule 9 of the Takeover Code (although a shareholder who is neither a director nor acting in concert with a director will not normally incur an obligation to make an offer under Rule 9 of the Takeover Code).

Tender Offer Waiver Resolution

The Company has applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit the Company to make on-market purchases of Ordinary Shares under the Tender Offer without triggering an obligation under Rule 9 of the Takeover Code for the Concert Party to make a general offer to Shareholders. The Panel has agreed, subject to the Independent Shareholders' approval on a poll, to waive the requirement for the Concert Party to make a general offer to all Shareholders where such an obligation would arise as a result of purchases by the Company of up to 625,000,000 Ordinary Shares, representing 57.86% of the current issued share capital of the Company.

The Concert Party (which includes the Directors) is currently interested in an aggregate of 301,751,057 Ordinary Shares, representing 27.93% of the current issued share capital of the Company. If the Company were to repurchase from persons other than the Concert Party all the Ordinary Shares that are the subject of the Tender Offer, the Concert Party's interest in Ordinary Shares would (assuming no other allotments of Ordinary Shares) increase to 66.28 % of the issued share capital of the Company by virtue of such actions.

If the members of the Concert Party, other than the Directors and their connected persons (who, as per paragraph 7 of this Part 1, have irrevocably undertaken not to accept the Tender Offer), accept the offer, the interest of the Directors and their connected persons in Ordinary Shares would increase from 13.63% to 32.35% of the issued share capital of the Company.

An increase in the percentage of the Ordinary Shares carrying voting rights in which the Concert Party is interested, as a result of the Tender Offer, would ordinarily result in the Concert Party being under an obligation to make a general offer to all Shareholders under Rule 9 of the Takeover Code.

The Company will seek the separate approval of Independent Shareholders for the Tender Offer, which will be proposed as an ordinary resolution taken on a poll at the General Meeting. The Concert Party will not be entitled to vote on the Tender Offer at the General Meeting.

Warrant Waiver Resolution

The Company has also applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit members of the Concert Party to exercise their warrants and options without triggering an obligation under Rule 9 of the Takeover Code for the Concert Party to make a general offer to Shareholders. The Panel has agreed, subject to the Independent Shareholders' approval on a poll, to waive the requirement for the Concert Party to make a general offer to all Shareholders where such an obligation would arise as a result of the exercise of the Concert Party's 32,750,000 warrants and options over Ordinary Shares. 

If the Concert Party were to exercise all of their 32,750,000 warrants and options and there was no Tender Offer, the Concert Party's aggregate interest in voting rights would increase from 27.93% to 30.05% of the Company's voting rights, which would ordinarily result in the Concert Party being under an obligation to make a general offer to all Shareholders under Rule 9 of the Takeover Code.

The Company will seek the separate approval of Independent Shareholders for the Warrant Waiver Resolution, which will be proposed as an ordinary resolution taken on a poll at the General Meeting. The Concert Party will not be entitled to vote on the Warrant Waiver Resolution at the General Meeting.

General

If both of the Waiver Resolutions are approved, no member of the Concert Party will be restricted from making an offer for the Company following such approval.

If both of the Waiver Resolutions are approved and if the consequence of the Tender Offer is the Concert Party coming to hold more than 50% of the Ordinary Shares, the Concert Party will be able to acquire further Ordinary Shares without consequence under Rule 9.  Note, however, that each separate member of the Concert Party will not be able to increase their percentage interest of Ordinary Shares over 30% of the issued share capital of the Company without consulting the Panel.

Further information required by the Takeover Panel in connection with the Waiver Resolutions is set out in Part 5 of the Tender Offer circular.

7.       INTENTIONS OF THE DIRECTORS IN RELATION TO THE TENDER OFFER

As at the Latest Practicable Date, the Directors and their connected persons were interested, in aggregate, in 147,262,698 Ordinary Shares, representing approximately 13.63%. of the Current Issued share capital of the Company.  The Directors have irrevocably undertaken that neither they nor their connected persons will accept the Tender Offer.

8.       ACTION TO BE TAKEN - TENDER OFFER

The procedure for tendering Ordinary Shares depends on whether Ordinary Shares are held in certificated or uncertificated form and is summarised below:

(i)       Ordinary Shares held in certificated form

Qualifying Shareholders who hold Ordinary Shares in certificated form and who wish to tender all or any of their existing holdings of Ordinary Shares should complete the Tender Form in accordance with the instructions printed thereon (including a witnessed signature) and in Part 3 of the Tender Offer circular, and return it by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or (during normal business hours only) by hand to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE. A prepaid envelope is enclosed for this purpose. Qualifying Shareholders who hold their Ordinary Shares in certificated form must also return with the relevant Tender Form their share certificate(s) and/or other document(s) of title in respect of the Ordinary Shares tendered. Completed Tender Forms must be received by not later than 1.00 p.m. on 13 June 2024.

(ii)      Ordinary Shares held in uncertificated form (that is, in CREST)

Qualifying Shareholders who hold their Ordinary Shares in uncertificated form and who wish to tender all or any of their existing holdings of Ordinary Shares should tender electronically through CREST so that the TTE instruction settles no later than 1.00 p.m. on 13 June 2024.

9.       ACTION TO BE TAKEN - GENERAL MEETING

Shareholders are requested to complete, sign and return the form of proxy to the Company's registrars, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY as soon as possible but, in any event so as to arrive by no later than 48 hours (excluding any day or part of a day that is not a working day) before the time and date of the meeting. The completion and return of a form of proxy will not preclude you from attending the meeting and voting in person should you wish to do so.

If you would like to vote on the proposed Waiver Resolutions, you may appoint a proxy in one of the following ways:

·    Via the CREST electronic proxy appointment service (for CREST members); or

·    By completing the form of proxy and returning it to our registrars Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, as soon as possible. The form of Proxy must be received by 3.00 p.m. 7 June 2024.

10.     warrants

The Company has warrants outstanding over 32,750,000 Ordinary Shares, exercisable at 1p per share.  The Company expects that a number of these warrants (other than those held by members of the Concert Party) will be exercised before the Record Date so that holders will become Qualifying Shareholders and able to participate in the Tender Offer.  These new Ordinary Shares arising on exercise of the warrants will be included in the number of Ordinary Shares in issue as at the Record Date, and therefore capable of participating in the Tender Offer.

11.     disclosure obligations

Under Rule 5.1.2 of the Disclosure Guidance and Transparency Rules (DTR), certain substantial shareholders are required to notify the Company and the FCA of the percentage of voting rights they hold as Shareholders through their direct or indirect holdings of financial instruments, within the limits referred to in the DTR.  The percentage of voting rights held by a Shareholder is likely to change as a result of the Company's purchase of Ordinary Shares in the Tender Offer, which may give rise to an obligation on the Shareholder to notify the Company and the FCA within two trading days of becoming aware or deemed aware of the change.  If you are in any doubt as to whether you have a disclosure obligation, please contact your solicitor or other professional adviser.

12.     RECOMMENDATION

Tender Offer

The Directors consider that the Tender Offer is in the best interests of the Company and its Shareholders as a whole.

The Directors make no recommendation to Shareholders in relation to participation in the Tender Offer itself. Whether or not Shareholders decide to tender their Ordinary Shares will depend, amongst other things, on their own individual circumstances, including their own tax position and their view of the Company's prospects. Shareholders are recommended to consult their duly authorised independent advisers in making their own decisions.

Shareholders' attention is drawn, in particular, to the risk factors, the further terms of the Tender Offer, UK tax considerations and the additional information in the Tender Offer circular.

Waiver Resolutions

As all the Directors are members of the Concert Party, they are conflicted from making any recommendation regarding the Waiver Resolutions. AHCF, however, which is acting as independent financial adviser to the Company for the purposes of the Takeover Code, considers the terms of the Waiver Resolutions to be fair and reasonable insofar as the Independent Shareholders and the Company are concerned.  Accordingly, AHCF recommends that Independent Shareholders vote in favour of the Waiver Resolutions at the GM.

DEFINED TERMS USED IN THIS ANNOUNCEMENT

In this announcement and the Tender Form, the following definitions apply unless the context requires otherwise:

All quoted share prices contained in this announcement have been rounded to the nearest pence. Unless otherwise indicated, all references in this announcement to times are to London times.