By the close of Circle Internet Group’s first trading day on Thursday, June 5, its stock had rocketed to $88, a 180% jump from the price institutional investors paid for their shares in the underwriting led by JPMorgan, Goldman Sachs, and Citigroup. The upshot: The company and insiders combined left a gigantic amount of money on the table by agreeing to a price far below what investors were willing to pay. As Fortune previously noted, that “left on the table” figure was the seventh largest in the history of all IPOs since 1980, exceeded only by the debuts of Visa, Airbnb, Snowflake, Rivian, DoorDash, and Coupang, the latter nicknamed “the Amazon of South Korea.”
Circle was just revving up. On Friday, June 6, its stock jumped another nearly 30% to $107.5. That additional leap hurtled the issuer for the USDC stablecoin to a historic record. Jay Ritter—a professor at the University of Florida and the world’s leading expert on IPOs—confirmed that for all go-public events since 1980 that raised $500 million or more, Circle’s two-day moonshot of nearly 250% ranks as by far the highest. The crypto favorite’s showing easily eclipsed the second place “pop” sounded by software provider C3.ai of 209% at its 2020 entry on the Nasdaq.
All told, Circle sold 39 million shares, raising $1.145 billion after underwriting fees of $67 million. Had the shares fetched the $107.5 close on June 6 instead of the $31 (excluding fees) paid in the presale by the likes of mutual and hedge funds, the company and insiders combined would have collected $4.144 billion. Hence, as of the second day of trading, the IPO had left a staggering $3 billion on the table. Put simply, for every $1 going to the sellers, $3 in two-day gains flowed to the underwriters’ Wall Street clients as a windfall.
At a market cap of $22 billion, Circle is selling at 140 times earnings. Given that treacherous valuation and the onslaught of stablecoin rivals invading its space, Circle is the epitome of an ultrahigh-risk stock. Money that might have been sitting in its treasury as a buffer against tough times vanished in this mind-bending spectacle that only the confluence of crypto craziness and Wall Street’s genius for underpricing IPOs could have staged.
Michael Einhorn wanted to quit China. He really did. He supports the Trump agenda that champions fewer regulations, a lower tax burden for businesses, and elimination of environmental mandates that inflate energy prices. He founded Dealmed on a shoestring in 2006; today it’s one of the two biggest privately owned, non-private-equity-held manufacturers and distributors of medical supplies in the New York–New Jersey–Connecticut tristate market. And he largely buys Trump’s argument that China is cheating on trade. So when the POTUS announced his “Liberation Day” tariffs of 135%, Einhorn figured there must be some decent alternatives to source the 10,000 products including masks, gauze, testing equipment, and gowns that he sells to clinics and health care facilities all over the U.S.
And this wouldn’t even be the first time Einhorn had weaned his company off China. During COVID, when Trump’s first set of tariffs had made importing more costly, Einhorn had pieced together a patchwork of suppliers that had squeezed the Chinese share of his company’s imports down to 15%. How hard could it be to repeat that strategy again?
Nearly impossible, as he found out. Over just five years the manufacturing world has changed so dramatically, that things that seemed possible then no longer make any financial sense. “China dominates the world in most health care manufacturing,” Einhorn tells Fortune. “Their automation, quality, pricing is just superior. I acknowledge the problems with China’s trade practices, but in the lane I play in, it’s just reality. China’s so far ahead of the curve I won’t hurt myself by moving away.”
His odyssey is instructive because it shows how quickly Chinese manufacturing has advanced; how few viable alternatives there are in certain sectors; and ultimately, how even after factoring in tariffs, many businesspeople who want to move away from China, can’t. Says Einhorn: “The administration can scream and yell, but how do you replicate what the Chinese are exporting into the U.S.? It’s just not happening.”
China ramps up
Einhorn’s trade saga starts in the early 2010s, when Dealmed was purchasing only around 15% of what it sold from China, mostly basic stuff such as adhesive tape and paper products such as surgical gowns. In those days, China’s quality for more upscale offerings didn’t match the norm for the U.S. and Europe, notes Einhorn. In 2014, Einhorn made a major pivot from distributor-only to doubling as a manufacturer. Dealmed was buying from wholesalers that purchased the goods from Chinese producers and shipped them from U.S. ports of entry to their own storage facilities and on to Dealmed’s warehouses. Dealmed then provided the final leg of the journey by handling sales to its widely dispersed health care customers served by its corps of reps. Einhorn determined that Dealmed could make more money by eliminating the middlemen, and making the same goods itself, by outsourcing the production to Chinese plants, many of which were churning out the stuff it was getting from the wholesalers. It first moved standard fare such as face masks and washcloths to the contract manufacturing model, then, as the Chinese upped their game, added on-site testing gear and other sophisticated wares.
By 2018, the thriving enterprise was importing 80% of its Dealmed-branded, outsourced products from China. All told, that new business accounted for around 30% of its revenues, and alongside its traditional franchise distributing Chinese brands for wholesalers, its total made-in-China sales contributed 45% of the total top line.
Then Trump’s tariff barrage pushed Einhorn to marshal the first of two dramatic course reversals. In September of 2019, the administration slapped 10% duties on selected Chinese medical exports, and in 2020, raised the levies to 25% on a far longer list. “The first round applied to only a small percentage of our imports from China due to so many exemptions. But the second 25% tariffs hit half of those imports,” recalls Einhorn. The growing antagonism toward China from both political parties, he reckoned, meant the big tariffs were now a lasting fixture of the trade landscape.
Dealmed swapped its purchases of paper for surgical gowns and operating table coverings to the U.S., even though they cost 15% more to make here than in Shenzhen or Nanjing, and relocated its testing-product output stateside as well. By the close of 2019, Dealmed’s glove-making had moved from majority-sourced from China to mainly fabricated in Malaysia. It also found new suppliers in Mexico, Canada, Vietnam, and India. Just before the pandemic struck, Dealmed was collecting just 15% of its revenues from Chinese imports, down two-thirds from its peak two years earlier. “The goal then,” says Einhorn, “was to pull all production out of China.”
How COVID spurred China to get ahead
The “downsize China” gambit proved a winner. The sudden, sweeping outbreak in the nation that birthed COVID shuttered China’s entire export sector in early 2020. By diversifying supply chains to Vietnam, Malaysia, and the U.S., Dealmed succeeded in filling a far bigger share of orders to doctors’ offices and clinics than its still mostly China-dependent rivals. But once the Chinese manufacturers rebooted in the spring of 2020, Einhorn witnessed up close the gigantic profits they reaped both from super-high, shortage-induced prices charged for normally routine stuff, and the surge in volumes for medical supplies the U.S. eventually imported to fight the scourge. He relates that Dealmed was still buying most of its face masks from China in the spring of 2020—and for months it was paying $2 per flimsy cloth covering, seven times the pre-pandemic charge.
The U.S.-China “Phase One” agreement signed that year effectively ended the big duties on medical imports—except for remaining levies on active ingredients in pharmaceuticals—as it turned out, for the next half-decade. Still, Einhorn’s customers suffered greatly from the Chinese shutdown early in the crisis and feared the return of tariffs. Dealmed led the industry in limiting risks by shunning the world’s biggest exporter and widening its global network. Einhorn reckoned that clinics and hospitals would deem Dealmed’s broad diversification a major advantage over its rivals that mainly remained China-centric.
That’s not what happened. “At first, our customers said, ‘We can’t rely on China,’” Einhorn recalls. “They encouraged us to diversify. We told them we were the best positioned because we had the widest global sourcing. Then, our customers quickly forgot about the COVID disruptions caused by China.” He recounts that the group purchasing organizations (GPOs) that negotiate contracts with manufacturers for equipment sales to hospitals and clinics, and medical practices that deal directly with insurers, dropped their brief enthusiasm for diversifying the supply chain, and sought the best prices, no matter where the gauze, face masks, or devices came from. “It was sad,” declares Einhorn. “Being the most diversified didn’t matter to our customers as memories of the pandemic receded. The insurers would only reimburse the providers based on the lowest cost. It was all about price. You couldn’t get the business by saying the product was made in the U.S. or Malaysia or Vietnam.”
As U.S. health care scoured the globe for the best bargains in the aftermath of COVID, the Chinese medical supplies sector embarked on an enormous expansion in scope and expertise. The impetus: the huge profits generated during the crisis. “The Chinese did a fabulous job building out their manufacturing capacity by reinvesting the big money they made during COVID,” says Einhorn. A prime example: INTCO Medical in Shandong province on China’s east coast. In 2020 INTCO multiplied its operating income sixfold over the previous year, and rechanneled the bonanza into building a web of plants that now covers five cities in its home nation, and a big factory in Vietnam, as well as planting sales organizations in the U.S., Canada, Germany, and Japan. INTCO’s sudden rise reportedly made its founder a billionaire.
The immense improvement in China’s medical-industrial engine triggered another U-turn for Dealmed. “We were growing rapidly and added a couple of hundred new products that we manufactured in the two years after COVID,” says Einhorn. “Some drifted back to China. I’d move a product from China to Vietnam, then a new product would go to China. As that happened, we realized that the best source was China. Its manufacturers became more aggressive post-COVID. They doubled down and invested in their products. Their quality became superior to everyone else’s in the world. No other country could match their automation, their capacity. They became very sophisticated.” Most of all, China offered the lowest prices that fit the U.S. providers’ jump from briefly wanting to widely disperse their purchases to grabbing the cheapest deals.
No better options
In 2024 the Biden regime launched a crackdown on the Chinese tech sector, especially targeting Beijing’s semiconductor industry. The mini trade war spilled over into medical equipment. Between late September 2024 and Jan. 1, 2025, the administration imposed “Section 301” duties of 25% on face masks and respirators, 50% on surgical gloves, and 100% on syringes and needles. “The Chinese saw what was going to happen a couple of years before and started building plants in Vietnam,” says Einhorn. “We shifted some of our production to Vietnam. But the companies were backed by companies in China.” Many items including paper products and testing equipment that Dealmed mainly ferried from China, didn’t get pounded by the 301 levies. But even for syringes and other targeted items, Einhorn found that after tacking on the tariffs, he could sell the Chinese products at the same or lower prices than the same goods made anywhere else. “Despite the 301 tariffs, we mainly stayed with China,” he says.
The 301 blow, however, proved relatively mild versus the Trump fusillade to come. Trump started at a 10% levy in February that he raised to 25% in early March, before uncorking the notorious 135% Liberation Day “reciprocal” load on April 9. That fresh heap got stacked atop the 301 duties, bringing the all-in for needles and syringes, for instance, to 235%. The Jenga-like tower of tariffs caused a serious but little reported problem for importers such as Dealmed. “This created a difficult dynamic for managing cash flow,” explains Einhorn. “When a container of syringes hit a U.S. port, I would have to pay the 235% tariff before the product hit the shelves. I would have been laying out enormous amounts of money in advance for a product that wouldn’t be sold for two or three weeks.”
To avoid the huge upfront cash payments, Einhorn severely slowed shipments from China. But he was also wagering that the initial, virtually embargo-sized levies wouldn’t last. His Chinese suppliers designed an elegant solution. “They were very savvy,” recalls Einhorn. “They said, ‘We’ll cut your prices by 10%. We’ll make the product for you, and store it for you, at no charge for three to four months.’ In effect, we were both hedging that the Trump tariffs wouldn’t stay at anything like those triple-digit levels.” When Trump announced the 90-day suspension of the reciprocal tariffs on May 12, the rate on Dealmed’s purchases dropped, from 235% for syringes and 160% on face masks to 130% and 55%, respectively. Einhorn then took delivery, enabling him to sidestep the cash-drain problem, and offer far lower prices to his customers.
For Einhorn, the Trump 30% extra tariffs are far from a deal killer for buying Chinese. “I’ll move some products away, but we’ll stay with China for now as the main supplier,” he declares. Even the total 130% duties aren’t stopping him from successfully selling syringes and needles to U.S. customers. All told, Dealmed’s not planning to backtrack on all the production it restored to China, as its manufacturing improved so notably following the pandemic. The overwhelming majority of gloves and paper contract-manufacturing that went from China to Malaysia, and to the U.S. and Canada, respectively, is now back in the nation where Dealmed debuted its outsourcing model. He finds that Vietnam and other Asian rivals to China not only generally charge somewhat higher prices, but lack China’s quality, range of products, and giant infrastructure that fosters superior economies of scale and guarantees that its manufacturers can meet sudden surges in orders by delivering huge quantities.
Einhorn avows that his company is getting over 40% of its revenues from products made in China, roughly back to the summit of 2018—and a much bigger number in dollar terms, since Dealmed has grown so much in those seven years.
Judging from what he’s seen firsthand, the Trump trade war won’t succeed at its objective. “It’s a misconception that the U.S. can extract ‘burden sharing’ by getting Chinese and other foreign companies to absorb the tariffs,” he says. He sees every day that hospitals and clinics, not the Chinese exporters, are paying the tariffs and passing the costs along to insurers, and hence the individuals and companies that pay the premiums.
He doesn’t have all the answers. “I’d rather do business in the U.S.,” he says. But he notes that issues ranging from extremely high workers’ compensation costs to mandated purchases of high-cost electricity handicap U.S. players on the world stage. “There have to be a series of incentives to lower costs for U.S. manufacturers,” he says. “Unless we can match the quality and pricing of China, my customers won’t pay more because it’s made in the U.S.” For now, he says, it comes down to this: “Cutting out China is not an option.”
For Tesla investors, Elon Musk’s involvement with Donald Trump has been a car wreck that’s unfolded in two chapters: one in slow motion, the next on dizzying fast-forward. During Musk’s 130 days running DOGE, a crusade whose dogged aggression virtually defined the administration’s mindset in the early months, the EV chief infuriated European customers by backing far-right politicians. And as Tesla sales dropped in the likes of Germany and France, and severe competition shrank its market share in China, Musk neglected tackling Tesla’s mounting problems and doubled down, famously battling to slash departments and headcount from the White House. In his absence, Tesla’s stock and earnings tanked.
Bad as that episode proved for Tesla, it at least provided a potential upside. “Even before DOGE, Musk clearly had too many spoons in too many pots through SpaceX, Neuralink, X, and his other ventures; then he got even more preoccupied by putting another spoon in another pot,” says Eric Talley, a professor of law and business at Columbia University. “But being in the White House also included a bit of an insurance policy for Tesla … Sitting close to the seat of decision-making was a big potential advantage.”
Now, says Talley, Musk has single-handedly turned that “insurance policy” into a liability—the threat that the administration will penalize the EV-maker, or at best do nothing to protect it. When Musk departed DOGE on May 30 amid the fanfare of Trump’s Oval Office send-off, Tesla shareholders still had little to toast, since the CEO wasn’t off-loading his empire’s myriad duties to refocus on the troubled manufacturer. Then the Musk-Trump feud, which exploded on June 5, triggered by the former’s lacerating takedown of the president’s signature budget bill, put Tesla overnight into a spot where it’s threatened not only by poor finances but the insults unleashed at his former sponsor, which both invite retaliation by Trump and endanger Musk’s survival as the enterprise’s leader that’s so critical to its gigantic valuation.
“The thing that’s different in the last 24 hours,” says Talley, “is that Musk not only walked away from an insurance policy of having a CEO situated high in government. He took out an anti–insurance policy. Any moment could erupt in a flameout from either side over social media that puts a target on Tesla’s back.” He notes that Tesla’s rivals are confronting the same headwinds from the wind-down in EV subsidies to purchasers proposed in the so-called Great Big Beautiful Bill, but the overhang from antagonizing the president “is a target its competitors don’t have.”
Indeed, the day it detonated, the blowup sent Tesla shares reeling 14.3% in a free fall that erased $153 billion in market cap, the biggest one-day drop in the company’s history. Though it clawed back around a third of those losses the following day, the stock’s still sitting 40% below its recent summit in mid-December.
Musk’s outrageous behavior would normally get him booted as CEO
Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, and one of the leading experts on the rules and ethics governing boards, told Fortune that at any other major public company but Tesla, Musk would be gone—and the dumping would have happened well before the new hurricane. “If his name had been Joe Doakes, he’d be gone in a nanosecond,” says Elson, “given the reputational damage he did alienating a good number of customers by going into politics at DOGE. It’s a mess. No other board would have let a CEO get involved in that way. You don’t have time to be a CEO!”
What keeps Musk in the job is his iron grip on the board, says Elson. He notes that Musk controls 30% of the shares, and that his influence extends beyond the power of that stake owing to the loyalty built, in part, by awarding directors large options grants that made many of them extremely rich. Elson reckons that it would be extremely difficult for disgruntled shareholders to prevail in lawsuits versus board members that might work toward forcing out Musk. “The road to winning liability cases against directors is a twisting, bumpy one,” he avows. “That Tesla reincorporated from Delaware to Texas makes it much tougher. That’s why Tesla moved to Texas. It was a race to the bottom, and they ran all the way to the bottom of the barrel.” According to Elson, Musk can’t be forced to leave, and won’t go unless he wants to, “and there’s nothing anybody can do about it.”
Nevertheless, the size of Musk’s ownership stake that’s the source of his control, and his attachment to Tesla going forward that’s dependent upon that position, are being tested by a landmark decision in the Delaware courts. The ruling, handed down last year, negated the $56 billion stock package awarded by the board in 2018 that accounts for two-thirds of Musk’s holdings. Tesla is now appealing to get that compensation restored. If the Delaware Supreme Court upholds the decision, Tesla is certain to attempt getting that compensation reinstated. But that route courts much higher risks now.
According to Talley, the board under Texas law could either attempt to restore the package unilaterally, or put the issue to a shareholder vote. He reckons that the former, more direct approach is now looking a lot less attractive to the directors than a few days ago. “The board may prefer now to go with a shareholder vote,” he says, given the potential backlash from rewarding Musk so royally when Tesla’s struggling, mainly because of his own actions. “It might appeal to the board to go that way and count on a rejection,” he adds. A turndown raises another potentially ghoulish outcome. “If they have a shareholder vote, and it goes negative, then you have a succession problem. You don’t want a CEO to take vengeance on the company,” a path the mercurial legend could take. It’s also unclear how Musk will react if the Delaware Supreme Court rules against him—same upshot: He owns far less of Tesla, and his incentive to rebuild the greatest source of his wealth would be greatly diminished.
Despite the selloff, Tesla’s still sporting a giant premium because of Elon Musk
Tesla enjoys a gigantic premium courtesy of Musk’s iconic status and the serial promises of delivering self-driving technology that will transform Tesla from a metal-bender into a fabulously lucrative tech player. As I detailed after Tesla reported Q1 results, it actually lost money selling cars and batteries and only managed a tiny profit through the sales of regulatory credits. Its “hardcore,” repeatable earnings from the auto and battery franchises over the previous four quarters totaled just $3.5 billion, down from $12 billion in 2022. At a P/E of 30—that’s three times the auto industry average—Tesla, based on bedrock fundamentals, might be worth $100 billion. But even after the recent selloff, its valuation stands at $960 billion. Hence, the difference of well over $800 billion arises from what I’ll call the “Musk magic premium,” created by his promises of epic innovations to come.
If Musk were to depart, a big part of that magic premium exits with him. It may be fading already. So for Tesla shareholders, it’s bad either way. Musk leaves and a hands-on leader arrives, but the genius’s halo no longer shields the stock; or he stays and keeps starting fights that undermine the brand and spreads his time among half a dozen pioneering ventures that he may find more riveting. As Elson puts it, “Anyone else would be fired after this, but he feels he can’t be. He has this aura that makes him feel untouchable. He’s got a cult status that seems to follow him and make folks think it’s okay that he doesn’t operate in a normal way.” But, Elson cautions, as Musk’s behavior gets more and more outrageous, the burden he’s heaping on Tesla, now and what investors increasingly perceive is looming, is catching up with him. We’ve just seen a shocking example of how fast that can happen, and how rapidly the myth can dissolve.
Traditionally, IPOs are a great deal for Wall Street and its prized clients, not so much for the companies the investment banks take public. Those fabled outfits argue that if they price the shares for the underwriting low enough, so that the hedge and mutual funds and other financial institutions that subscribe get a big “pop” the first day of trading, the grateful buyers will repay the favor by staying loyal and holding for the long term, providing a steadfast ownership base going forward.
Whatever the real benefits of that arrangement may be to the issuer, it most often comes at an enormous cost. Though we haven’t seen many IPOs, and hence much underpricing recently, we’ve just witnessed an outstanding case of the phenomenon in action. It’s one for the ages, and specifically, this case’s stunning dimensions exemplify the craziness that typifies the surreal Age of Crypto.
On June 5, Circle Internet Group, issuer of the highly successful stablecoin USDC, debuted on the New York Stock Exchange (ticker: CRCL). In the days prior, the deal team led by JP Morgan, Citigroup and Goldman Sachs sold 34 million shares to institutional purchasers at $31 per share. The prospectus states that the IPO raised $996 million after underwriting fees of $59 million. Of that total, $434 million flowed into the company’s treasury, and the balance of $562.5 went to a group of large shareholders who sold at the offering, a group that includes co-founder and CEO Jeremy Allaire and several VC funds.
By 1:00 PM, Circle (CRCL) had jumped to $95, and then drifted downwards to close at $82.84, still posting a 167% gain for the day.
The rub: Circle could have piled more than twice as much into its coffers, and its insiders could have collected double the gain, if they’d gotten full price. It appears that the $31 per share amassed in the underwriting was nearly $52 less than what investors were willing to pay once its stock hit the open market. If Circle had pocketed the full $82.84 where its shares closed the day, it would have collected $1.2 billion after fees instead of $434 million. So the process led the crypto highflier to forego $766 million that it could have added to its cash horde. At the first day closing price, the execs, directors and funds, directors would have gotten $1.56 billion, or nearly $1 billion more than their proceeds from the IPO.
Hence, the amount “left on the table” tallies to roughly $1.76 billion.
In the annals of “amounts left on the table” from IPOs, that $1.76 billion looms big. Jay Ritter, a professor at the University of Florida and the world’s leading expert on IPOs, told Fortune that the figure ranks seventh largest for all offerings since 1980. The underwriting versus first day price shortfall is only exceeded by the instances of Visa, Airbnb, Snowflake, Rivian, DoorDash, and Coupang (the South Korean e-commerce platform that sacrificed just a tad more on its 2021 outing at $1.85 billion). The $1.72 billion that went to first day gains for the Wall Street favorites and not to Circle is almost exactly twice the $849 million in cash that, as the prospectus disclosed, the USDC purveyor held on its balance sheet prior to the offer.
Running the numbers on Circle stock
At the market close, Circle’s market cap sat at a towering $16.6 billion. That’s gives Circle a PE of 106 based on its net earnings of $157 million in 2024, making it according to Ritter “an incredibly expensive way to get exposure to cryptocurrencies.” He notes that Circle makes money by issuing USDC, on which it pays nothing to holders, and collects interest garnered by channeling the proceeds into what appear to be Treasuries and other “safe” fixed income securities that as of Q1, were yielding around 4.2%. To grow into its big multiple, Circle needs to mint huge new quantities of the stablecoin so that its spread income rises at a rapid rate. “It all depends if they can grow fast enough and get away without paying interest,” says Ritter. “For that to happen, stablecoins would have to become a preferred way for people to make transactions. What if their coin turns out to be incredibly lucrative, which is what needs to happen given that PE? In that case, a competitor could come in and pay interest,” and grab a big chunk of the stablecoin market from Circle.
Put simply, if competition rises and times get tough, Circle and its shareholders may sorely miss the extra almost $766 million that went to first day gains for the underwriters’ clients and not onto its balance sheet. That’s fives times its profits for last year. Considering the risks in the Circle business model that hinges on virtually creating a revolutionary new medium of exchange, losing that “rainy day” cushion, what now seems a minor sacrifice amid all the hoopla, may someday loom large.
Traders work on the floor of the New York Stock Exchange (NYSE) during the Circle Internet Financial Ltd. initial public offering (IPO) in New York, US, on Thursday, June 5, 2025.
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