Financial Times reveals Telegram's financial report: the encryption giant disguised as a communication platform relies on TON support to cover operational losses

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Founder Durov Arrested: Not Just About Freedom of Speech, But Also Cryptocurrency

The Financial Times reported that Pavel Durov, the billionaire founder of the messaging app Telegram, has recently been in the spotlight again as he was arrested in France. He is accused of failing to effectively control criminal content on the platform, sparking discussions about freedom of speech and the responsibilities of tech companies in platform management.

However, Telegram's financial reports show that the importance of its encrypted business is as critical to its operations as its messaging services.

Introduction of Encrypted Business Reverses Telegram's Losses

According to the financial report obtained by The Financial Times, the contribution of cryptocurrency to the company's revenue is significant. Telegram Group is registered in the British Virgin Islands and has one of its main operating subsidiaries in the United Arab Emirates. The profit and loss statement, signed by Durov and provided by PwC Dubai branch in April, revealed that despite recording an operational loss of $108 million, the revenue reached $3.425 billion, mainly from cryptocurrency transactions. The financial report of Telegram includes $500,000 in digital asset revaluation gains and $86 million in other comprehensive income.

The main sources of revenue for Telegram are its "Integrated Wallet" and "Collectibles Sales," which account for more than 40% of the company's total revenue. This indicates a significant shift in the company's business model, reflecting its increasing reliance on digital assets.

Collaboration with TON Foundation on Cryptocurrency Wallets Boosts Telegram's Revenue

In 2023, Telegram integrated a cryptocurrency wallet as a new source of revenue, allowing users to store, send, receive, and trade cryptocurrencies. According to Telegram's financial disclosures, this wallet generates revenue by providing services and facilitating transactions of Toncoin TON. Telegram's financial report describes the strategic integration of the cryptocurrency wallet as a significant revenue driver. This service, provided through a collaboration between Telegram App and the Toncoin TON Foundation, enables users to seamlessly conduct cryptocurrency transactions within the messaging platform.

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All Digital Assets of Telegram Are Toncoin TON, Maintaining Financial Health

Telegram's digital assets are mainly composed of Toncoin TON, which is crucial for the company's financial health. These digital holdings are valued at nearly $400 million, far exceeding the company's cash and equivalents. Telegram enhances its revenue by selling collectibles such as usernames and virtual phone numbers, and accepting Toncoin TON as a payment method. These revenues are generated when collectibles are allocated to users or when fees are earned from transactions between users.

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Telegram's strategy of holding digital assets reflects its cryptocurrency investment policy. Gains from asset appreciation are accounted for, while losses are carefully managed through revaluation gains in equity.

Durov Buys Telegram Convertible Bonds, Pays for 30,000 Euro Subscription with Toncoin TON

The Financial Times specifically mentioned that in 2023, Durov not only bought $64 million worth of Telegram convertible bonds but also purchased 15,000 six-month Telegram subscription accounts worth $300,000 to give away, paying with Toncoin TON to Telegram.

"Imbalance of Income and Expenses," Suspicious Financial Stability, Telegram Overvalued

The Financial Times believes that despite lucrative cryptocurrency earnings, Telegram's financial report raises questions about its overall financial stability.

The company's reported operating expenses exceed $450 million, compared to $3.425 billion in revenue, showing a financial imbalance. In addition, the company's reliance on digital assets calls into question the "over $30 billion" valuation claimed by its CEO Durov this year.

Telegram's significant liabilities include over $2.3 billion in convertible bonds raised from sovereign wealth funds and hedge funds. While these financing methods provide capital, they also emphasize the company's need to maintain and expand its cryptocurrency business to retain investor confidence.

It is worth mentioning that the current circulating market value of Toncoin TON is $13.59 billion, but with limited liquidity, the trading volume-to-market cap ratio on 8/31 is 0.018, which has recently dropped significantly. However, with the substantial increase in Toncoin TON's price in 2024, if Telegram's earnings through Toncoin TON also increase significantly, it should benefit the financial report. Nevertheless, operating in a state heavily reliant on volatile cryptocurrencies as financial support may also pose various risks.

Founder Arrested, Interdependence of Toncoin TON and Telegram

Durov's arrest and the subsequent market reaction have also affected the value of Toncoin TON, as traders react to the uncertainty surrounding Telegram's future. The company's financial disclosures show that it sold a significant amount of holdings in Toncoin TON before the sharp drop in its price.

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Issuing Coins and Issuing Bonds

The events following the 2023 financial report were revealed, with Telegram issuing $330 million in corporate bonds in March 2024, generating $300 million in cash income, due on 3/22/2026 with an annual interest rate of 7%, paying interest semi-annually. Telegram then sold the Toncoin TON obtained from the integrated wallet for $243 million in cash.

The Financial Times stated that although Durov owns 100% of Telegram, the company has raised over $2.3 billion in convertible bonds from sovereign wealth funds, hedge funds, and tech investors.

Financial Times Commentary: Is Investing in Telegram Worth It?

The Financial Times evaluates that even disregarding the serious dependence on cryptocurrency and significant liabilities, one might question whether a company that has to spend over $450 million in operating expenses to earn $3.42 billion in revenue is worthwhile?

Telegram's commitment to user privacy and limited content moderation make it popular among users but also subject it to regulatory scrutiny in multiple countries. With the company facing legal challenges and evolving global regulations, its financial strategy heavily reliant on cryptocurrency is both a growth opportunity and a significant risk.

Telegram founder Pavel Durov indicted on serious charges: aiding illegal transactions and organized crime, facing up to ten years in prison