With annual revenue of US$43 billion, why does Galaxy Digital surpass BlackRock to sprint for US stock IPO?

Original text: Galaxy Digital, with $43bn in revenue, is twice the size of BlackRock. How?

Editor: Edward Robinson , DL News

Compiled: lenaxin, ChainCatcher

Preface

• Galaxy Digital is about to be available in the United States.
• Although the size is small, the revenue is extremely large.
• Almost 99% of the company's revenue comes from digital asset sales.

What do Netflix, Starbucks and Visa have in common?

In terms of revenue, each of these household names is much smaller than the Galaxy Digital, at least at first glance.

According to its IPO prospectus filed with the Securities and Exchange Commission (SEC), the listed company headed by CEO Michael Novogratz reached a record $42.6 billion in 2024, a figure that makes it successfully ranked among the top five Fortune's top 500 companies in the United States.

Shocking results

This amazing performance has attracted widespread attention from the market: How can an emerging company with only seven years of establishment and only 520 employees create twice the annual revenue beyond the world's largest asset management company BlackRock (19,800 employees)? The answer may be hidden in its unique financial statistics.

Galaxy's revenue structure shows that its revenue mainly comes from service fees, Bitcoin mining and other businesses. But its financial statement data show that its digital asset sales business contributed nearly 99% of its total revenue.

So what's the problem? Why confuse business revenue with sales of Bitcoin, Ethereum, USDT and other cryptocurrencies?

When DL News asked Galaxy Digital 's media relations team for guidance, it was told that the company could not comment because it was in a silent period before the initial public offering.

Trading volume

Galaxy's revenue recognition method is to directly count digital asset transactions executed for customers into total revenue. According to its financial documents, customers include centralized cryptocurrency exchanges such as Coinbase.

“Companies in the trading space present transaction volumes and commissions in a variety of ways,” analyzed Mark Palmer, a fintech and digital asset analyst at Benchmark Co., “Galaxy chose to include transaction volumes in full into revenue.”

“In the case of Galaxy Digital , its financial report is presented by taking full account of transaction volume to total revenue ,” Palmer told DL News.

" This is common among market makers," added Matthew Rappaport & Berkman.

To be sure, Galaxy Digital will deduct digital asset sales from total revenue as transaction fees when calculating net profit, plus other costs, and the company finally announced a net profit of $347 million last year.

Matthew Foreman, a partner and co-chair of the tax division of Falcon Rappaport & Berkman in New York, also believes that the company's multi-billion-dollar revenue scale is indeed extraordinary. By deducting revenue from transaction fees, Galaxy Digital’s financial processing method is more like a market maker—the institution that provides liquidity to the market.

“ I can’t confirm their specific operations, but this approach is consistent with the typical characteristics of market makers — whether it’s digital assets, corn futures, or any other asset class or subcategory, ” Foreman told DL News.

Further analysis shows that Galaxy Digital's accounting processing model shows that it exists as a "trading entity" that directly controls assets, rather than a "intermediary" or "broker" that represents client transactions.

“ In digital asset trading and market making businesses, this accounting treatment has a significant impact due to the extremely large transaction size, ” Foreman said.

Three major operating departments

Galaxy Digital sells more than just digital assets.

The company is divided into three operating departments.

1. Global Markets: Provides financial services and products to investors, and operates trading departments and investment banking departments;
2. Asset Management: Provides active and passive management investment products for retail and institutional customers;
3. Digital Infrastructure Solutions: Covering digital asset infrastructure services such as Bitcoin mining business.

Global Marketing Business generates revenue through paid customers. In addition, its fourth-quarter financial report disclosed that the business also includes realized and unrealized returns of digital assets and equity investments.

Asset Management not only manages investments for the company and its subsidiaries, but also provides asset management services to customers. Its financial statements also include accounting for realized and unrealized profit and loss of underlying asset investments. Although Galaxy Digital's amazing revenue scale has attracted market attention, this is just an operational feature unique to the cryptocurrency industry.