After several months, the Layer 1 public chain sector has recently seen another round of financing valued at over $1 billion. Pharos—a high-performance parallel Layer 1 public chain—announced an upgraded capital partnership with GCL New Energy, a listed company on the Hong Kong Stock Exchange. GCL New Energy completed its investment subscription in Pharos at a $950 million valuation, with an investment amount of $24.73 million.

GCL New Energy is a well-known domestic private solar photovoltaic (PV) power generation enterprise, primarily engaged in the development, construction, operation, and management of solar power plants. This aligns closely with Pharos’s strategic focus on Real World Assets (RWA), making this transaction appear to hold positive strategic significance for both parties.

However, the deal has also raised numerous questions across the market: In today’s dismal secondary market, can Layer 1 and RWA projects truly still command a $1 billion+ valuation in the primary market? And would a publicly listed company readily invest in such high-risk assets?

Hidden within the dense announcement lies a complex, mutually binding “betting” transaction. Many details indicate this is not a conventional direct fundraising deal—but rather a bundled arrangement involving mutual investments, staged closings, and market-cap-based performance clauses. Crucially, all core closing conditions are entirely under GCL New Energy’s control. Should any single condition fail to be met, the entire agreement becomes a mere piece of paper with no substantive enforceability.

Specifically, Pharos’s share subscription in GCL New Energy serves as a preconditioned investment: Pharos will subscribe to up to 183,480,000 newly issued shares of GCL New Energy at HK$1.05 per share—valued at approximately HK$150 million. This price represents a 15% discount relative to GCL New Energy’s current trading price of HK$1.23. At first glance, Pharos appears to benefit—but GCL New Energy clearly understands financial engineering well: it has imposed five stringent closing thresholds on this share subscription, and failure to meet any one threshold terminates all subsequent closings. The agreement’s total validity period is only 18 months.

In detail, the investment is divided into five tranches, with unlocking conditions exclusively tied to the listing performance of the Pharos Token:

• Tranche 1 (50%): Closes only if the Pharos Token is successfully approved for listing on relevant Web3 exchanges and opens at or above the agreed investment price (calculated based on the $950 million valuation). If listing fails or the token opens below that price (“breaks down”), GCL New Energy retains the right to halt the closing.

• Tranche 2 (12.5%): Closes only if the Pharos Token’s average Fully Diluted Valuation (FDV) over the three months prior to listing remains ≥ $760 million.

• Tranches 3–5 (each 12.5%): Unlocking conditions follow similar logic but apply to progressively later FDV averaging windows—Tranche 3 covers Months 4–6 post-listing; Tranche 4 covers Months 7–9; and Tranche 5 covers Months 9–12.

Once the Pharos Token satisfies a given tranche’s closing condition, the corresponding portion of Pharos’s share subscription in GCL New Energy automatically takes effect—and simultaneously, GCL New Energy’s subscription for Pharos Tokens also activates, with identical unlock ratios. In other words, upon successful Pharos Token listing, Pharos immediately delivers a HK$75 million share subscription to GCL New Energy, while GCL New Energy purchases Pharos Tokens valued at approximately HK$96.73 million—based on the $950 million valuation. For GCL New Energy, this is effectively a near-risk-free deal: it secures HK$75 million in upfront subscription proceeds and, should the Pharos Token perform well, acquires nearly HK$100 million worth of tokens at the initial listing valuation—offering substantial profit potential.

The bullish sentiment has already reflected in GCL New Energy’s stock price. Although GCL New Energy first disclosed its collaboration with Pharos on January 8, its share price had already surged significantly a week earlier—from HK$0.80 to HK$1.30 by the announcement date—and peaked later at HK$1.80, after which it entered a sustained downward trend. In trading markets, this pattern is a textbook case of “front-running.” Another potential issue: Pharos previously disclosed cumulative funding of only $8 million (≈HK$62.61 million). Even if all preconditions are met, this funding gap may pose a serious challenge for Pharos.

So where does the $950 million valuation come from? An intriguing detail disclosed in the agreement explains GCL New Energy’s rationale for valuing Pharos at $950 million. Per the agreement, the valuation is derived primarily from on-chain Total Value Locked (TVL). Within the Layer 1 sector, the average ratio of Fully Diluted Market Cap (FDV) to TVL for Ethereum, BSC, Hyperliquid, Tron, and Avalanche is 10×, with a median of 6×; Monad—whose technical architecture is similar—also uses a 10× ratio. Consequently, both parties agreed to apply a multiplier of 4.75× to Pharos’s TVL. Pharos currently reports a TVL of $250 million, applied at a 20% discount—yielding the initial $950 million valuation.

Regarding asset composition of the locked value, the agreement discloses that among Pharos’s current TVL, 51% originates from renewable energy assets—namely distributed PV operators and centralized power plant operators—while the remaining 49% comes from financial assets issued by fund management companies and credit asset originators. In other words, Pharos includes physical assets in its TVL calculation—and specifically, power plants and PV assets directly related to the counterparty in this transaction. This methodology sets a precedent in the Layer 1 industry. In fact, Pharos’s mainnet has yet to officially launch, and professional on-chain data platform DeFillama does not list Pharos’s TVL at all—the reported $250 million figure is solely self-reported by the project team.

The stock’s premature price surge—combined with the layered, conditional “betting” structure embedded in the agreement and the inflated valuation methodology—makes the true purpose of this transaction clear: For GCL New Energy, it may be a financial maneuver leveraging crypto hype to inflate its stock price and boost corporate market capitalization; for Pharos, it is an attempt to leverage a listed company’s physical assets to fabricate a high valuation narrative and generate momentum ahead of its Token listing. Both sides gain what they need—but pass the risk onto the broader market and future investors. When a real-economy company injects physical assets into a Layer 1 project—and then multiplies their value several-fold to effortlessly conjure a $950 million valuation—is this kind of capital game simply too absurd? Does the crypto market really need such RWA?

[RootData]