Wormhole forcibly raises prices, can LayerZero's acquisition of Stargate still proceed?

Author: Azuma, Odaily Planet Daily

The proposal for "LayerZero's acquisition of Stargate," which has entered the formal voting process, has suddenly changed.

On August 21, LayerZero's direct competitor, the Wormhole Foundation, publicly announced on X that LayerZero's acquisition offer of approximately $110 million for Stargate undervalues Stargate's protocol assets and growth. Therefore, Wormhole plans to submit a higher bid and requests a suspension of the current Snapshot voting for 5 business days to refine the bidding process and protect the interests of STG holders.

Background Summary: LayerZero Initiates Acquisition

The acquisition proposal from LayerZero for Stargate dates back to August 11 ------ see the reference article "LayerZero Proposes to Acquire Stargate: Tokens Surge Over 20%+, but This Group Strongly Opposes."

In the early hours of that day, the LayerZero Foundation released a draft in Stargate's governance forum, proposing to acquire Stargate for a total price of $110 million.

Specifically, the LayerZero Foundation proposed to exchange all circulating STG (including STG that is staked/voted) for ZRO at a ratio of 1 STG : 0.08634 ZRO, based on a price of $0.1675 per STG (which was slightly above the market price at the time) and $1.94 per ZRO. After the acquisition, Stargate would be more deeply integrated into the LayerZero ecosystem, the Stargate DAO would be dissolved, and all excess revenue generated by Stargate in the future would be used to reduce the circulating supply of ZRO through a buyback plan.

After the proposal was announced, LayerZero and Stargate's official Twitter accounts frequently interacted, both sides discussing "cooperation and win-win," which led to a surge in both ZRO and STG prices on that day. However, a closer look at the discussions in Stargate's governance forum reveals that the vast majority of Stargate members oppose the acquisition proposal, believing that LayerZero's offer is too low.

Early Progress: Voting Initiated, Large Holders Dominate

On August 18, the proposal officially initiated voting on Snapshot, where STG holders would collectively decide whether to accept the acquisition offer. Compared to the initial proposal, LayerZero did not raise the acquisition offer but claimed it would share 50% of Stargate's total revenue over the next six months with veSTG holders (i.e., the users who vote directly).

After the voting started, it quickly surpassed the minimum vote requirement, with support peaking at over 97% (according to the rules, a majority of over 70% is required for approval). LayerZero co-founder Bryan Pellegrino even proudly stated during a CounterParty podcast, "This is the most participated vote in Stargate's history."

Such a one-sided voting pattern is not surprising. Although many members of the Stargate community oppose the offer, LayerZero and Stargate, as fully integrated backend protocol and frontend product, are difficult to view as two independent entities. In fact, half of the Stargate Foundation's board members are appointed by LayerZero… Considering the interactive rhetoric between LayerZero and Stargate, it is not hard to imagine that both parties control enough voting power, making this a vote that is "destined to pass but needs to go through the motions."

Wormhole's Machinations: Even if They Can't Compete, They Want to Annoy You

Perhaps even LayerZero and Stargate did not expect Wormhole to intervene at such a critical moment.

As of the time of writing, unlike the "harmonious scene" of frequent interactions between both parties after LayerZero's acquisition proposal, after Wormhole expressed its intention to acquire, Stargate's official Twitter has not posted any related updates, and LayerZero has only had co-founder Bryan seemingly respond with, "This is not going to happen."

As of the time of writing, Wormhole has not made a formal offer, and the reason is quite amusing ------ Wormhole claims it needs more time to conduct due diligence on Stargate's valuation because they are not as familiar with Stargate as LayerZero, which has half of the board seats on the latter's foundation…

Overall, the subsequent developments of this incident can be categorized into four scenarios, and in any case, Wormhole will be pleased.

• The first scenario is that Stargate suspends the voting, leading to a bidding war between Wormhole and LayerZero, with Wormhole potentially winning. In this case, Wormhole would directly take away the core product of its biggest competitor, thereby capturing more market share.
• The second scenario assumes that LayerZero wins the bidding, or that LayerZero unilaterally raises the offer and pushes the proposal forward. In this case, LayerZero would pay more funds to STG holders, while Wormhole would not spend a dime and could watch its competitor expend more resources.
• The third scenario is that Stargate ignores Wormhole's offer, citing that the process has already started, and the proposal continues to advance (the current support rate is still high). If LayerZero completes the acquisition, the STG holders who miss out on a higher offer will inevitably be angry, and Wormhole would be pleased to see the community divide within LayerZero.
• The fourth scenario is that Stargate forcibly pushes the vote, and if the proposal ultimately fails due to opposition from the Stargate community (the current support rate is still over 88%, making failure unlikely), Wormhole's obstruction plan succeeds.

In summary, I personally lean towards the second and third scenarios, as Stargate is a core product of LayerZero, and the latter would definitely not want to bear the consequences of losing that product.

Fluid's Chief Operating Officer DMH succinctly summarized the current situation: "It is clear that Stargate and LayerZero had already reached an agreement before the proposal; Wormhole is very angry that LayerZero bought Singapore with a bag of rice; therefore, Wormhole chooses to raise the price, trying to disrupt LayerZero's acquisition plan; but Stargate will ultimately be absorbed by LayerZero, and the market is well aware of this, so no dramatic situations will arise."

Wormhole may have already known the final outcome was predetermined before making an offer, but just by making some noise, they can annoy their biggest competitor without any loss to themselves. This move is simply a top-notch scheme.