Telegram is quietly tacking on a $1.2 billion private round to its mega ICO

Telegram founder Pavel Durov.
Telegram founder Pavel Durov.
Image: Reuters/Albert Gea
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Telegram’s “secretive” next phase of its initial coin offering (ICO) will raise $1.15 billion for the chat platform, according to offering documents seen by Quartz. If the funding round is successful, Telegram would have raised $2 billion from accredited investors—institutions and wealthy individuals—before its tokens are even offered to the public. The funding exercise would also be the largest of its kind, dwarfing the $1.3 billion raised by a blockchain platform called EOS.

Telegram is proposing to create a new blockchain, somewhat like ethereum, that would create a variety of connected services and products including apps, services and file storage. Its 200 million existing users would transact on this blockchain with its GRAM crypto-tokens. Investors in the first phase of Telegram’s ICO were invited to take part in a “subsequent round” of token sales in an email sent Jan. 15 by John Hyman, who is listed as Telegram’s chief investment adviser on earlier offering documents.

The email offered an update on the then-ongoing first investment round, and further details of a planned second round. The first phase raised $850 million for Telegram, with an average price of $0.38 for each token, which are known as GRAMs, according to the email. “The combination of the scale and quality of the demand has led us to rethink our strategy for both this transaction and the next round,” Hyman wrote.

Telegram plans to raise $1.15 billion in its next round of token sales, at a price of $1.45 per GRAM, according to Hyman’s email. The funds would be raised by selling 793.9 million GRAM tokens. This price is 2.8 times higher than the average price of a GRAM token in the first round of sales. Investors in the second round must buy a minimum of $1 million worth of GRAM tokens, according to an “indication of interest” document attached to Hyman’s email. Hyman and other executives listed in Telegram’s offering documents didn’t respond to a request for clarification from Quartz.

Tokens sold in the later round are not subject to “lock up” restrictions, meaning they will be released to investors as soon as they are available, Hyman wrote in the email. By contrast, tokens sold in the first round are released to investors in quarterly increments after the launch of the Telegram Open Network (TON), the blockchain-based platform that will be funded by the ICO’s proceeds.

Hyman also assured prospective investors in the later round that they would pay the same price for the tokens. Some prospective investors in the first round earlier told Quartz that they had passed on the deal because they weren’t sure if they were getting the same price as others. Some early investors are flipping their allocations for about double what they paid, Quartz reported last week. This practice appears to violate the terms of the sale, which contains a “lock-up” clause prohibiting the re-sale of GRAM allocations within 18 months, according to the “indication of interest” document.

Telegram lodged documents with the US Securities Exchange Commission on Feb. 13, reporting that it had raised $850 million from 81 investors in its first investment round. According to one prospective investor, who didn’t wish to be named due to confidentiality agreements with Telegram, the deadline for those first-round investors to transfer their funds to Telegram ended just days earlier, on Feb. 9.

If Telegram’s second investment round sells out, the firm will be left with 1.96 billion GRAM tokens from its total supply of 5 billion tokens for a public sale. Earlier offering documents said Telegram would sell only two-thirds of its total GRAM supply, meaning it would have 260 million GRAM tokens available for sale to the public. Using the pricing formula from earlier offering documents, an eventual public sale would raise an additional $620 million. This would bring Telegram’s ICO to $2.6 billion, valuing its blockchain platform at $4 billion. The remainder of the GRAM supply will be held in reserve for the platform’s developers and as rewards to active users, an earlier leaked primer to the offering said.

Telegram’s earlier offering documents had a public sale scheduled for March. With the second round of private investments now pegged for mid-March, it’s unclear when the public offering would take place. The TON roadmap calls for a launch of the platform in the first quarter of next year. In the meantime, Telegram has more investor interest than it can deal with. Hyman said in his investor update that the first round alone attracted $3.75 billion in “expressions of interest” from a hundred investors. These investors were evenly distributed across Asia, Europe, and the United States, he wrote. He wrote, of the response: “We are humbled by the great reception you and other investors have given to TON and the offering.”