Aero Merger Update: Metadex03 and Cross-Chain Expansion

The AERO token is trading in line with market comps, although behind Uniswap, even after its expansion to Ethereum was announced. We believe this is an indication of legitimate concerns around VE token mechanics and emissions sustainability. However, we also believe these concerns are increasingly priced in, while the upside from Ethereum expansion and Metadex03 is not. Specifically, it does not appear the market fully appreciates the upside from internal MEV auctions.

Our base case represents Aero sustaining its ~47% Base share while capturing just 5% of Ethereum DEX volume over the next 12 months, combined with a 50% discount to internalized MEV capture. Together, this implies forward revenue of ~$266M annualized post launch, which represents a 96% increase from current levels. We believe some delivery on AER emissions reduction and REV buybacks justifies a 10% increase in the multiple.

The key proof points to monitor are: (1) Ethereum market share and combined revenue run-rate through the first few epochs post-launch; (2) observable reduction in the emissions-to-revenue ratio without liquidity degradation; and (3) early traction on Ethereum/Arc/Syndicate demonstrating that the Metadex model generalizes beyond Base/OP. If these develop in line with the roadmap, Aero has a credible path from being the dominant Base DEX to core liquidity infrastructure for a meaningful share of the onchain economy.

Risks

Ethereum competition: Uniswap, Curve, and Fluid have entrenched liquidity and routing relationships on mainnet. Aero's veToken flywheel worked on Base, where it launched as the native liquidity layer from the very beginning. Replicating that dynamic on Ethereum against incumbents with years of integrations and LP mindshare is a fundamentally different challenge. Failure to reach even low-single-digit share would leave the thesis dependent on Base, Arc, and Syndicate app-chains alone.

Fee compression: The 0.078% effective fee rate on Base reflects Aero's dominant market position. As competition intensifies — particularly from Uniswap v4 hooks and aggregator-native liquidity — take rates could compress before Metadex03's incremental revenue streams come online. Our model assumes the current fee rate holds; a 20% compression would offset some of the Ethereum expansion upside.

Execution on Metadex03: Aero will not launch until Q2 2026, leaving ample time for competition to further cement market share. Delays are always a possibility as well, and due to the novelty of many of these upgrades, it will likely take 9+ months before we know if these upgrades are successful as REV, AER, and internal MEV auctions are untested at scale. Dromos Labs' projections (40% revenue uplift, 25% emissions reduction) are based on backtests and simulations, not live data. If partners fail to route sufficient exchange-adjacent flow through REV, or if AER's dynamic emissions create unintended LP behavior, the unit-economics improvement may not materialize.