Coinbase IPO comes to NASDAQ
On Wednesday, Wall Street was buzzing with excitement as Coinbase, the largest crypto platform in the United States, prepared to make its public debut on a conventional exchange via a direct listing rather than a more traditional initial public offering.
Coinbase COIN’s entry into the public sector is a watershed moment in the cryptocurrency environment.
There are few ways to secure direct ownership of crypto currencies, outside of buying them directly, a service that Coinbase provides for a fee, and which investors appear willing to pay for.
Coinbase, a bitcoin and ethereum exchange, announced last week that its first-quarter revenue jumped 847 percent to $1.8 billion, and that it now has 56 million confirmed users.
Leeor Shimron, an analyst at FundStrat Global Advisors, described the Coinbase listing as seminal. “Coinbase’s direct listing is a watershed moment for the crypto industry.”
Wedbush analyst Dan Ives said the listing is a reflection of cryptocurrencies’ having arrived at the mainstream.
“Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of bitcoin and crypto for the coming years in our opinion,” he wrote in a research note Tuesday.
In a direct listing, a company floats its shares on a stock exchange but without hiring banks to underwrite the transaction as in an IPO.
The following is what you need to know about the Coinbase lising.
What is Coinbase?
The Silicon Valley crypto exchange was co-founded in 2012 by Brian Armstrong, 38, who runs the platform as chief executive. Fred Ehrsam, a Coinbase director, also played a role in the company’s creation.
Conform Forbes, Armstrong’s current net worth is $6.5 billion, based on his stake of the company, and his fortune is expected to rise if the direct listing is successful.
When will Coinbase be available to the general public?
The Nasdaq is expected to list Coinbase on Wednesday.
While the exact time of the listing is unknown, Palantir Technologies Inc.’s PLTR, direct listing in September saw the first trade after 1:30 p.m. Eastern time.
Where will it list?
Coinbase would go public on the Nasdaq under the ticker symbol “COIN” as a direct listing, which means it will not raise new capital like a conventional IPO would.
Coinbase is the Nasdaq’s first big direct listing, following the direct listings of Spotify SPOT, Slack Technologies WORK, and Palantir.
On Tuesday evening, Nasdaq assigned Coinbase a reference price of $250 per share, valuing it at over $65 billion.
Coinbase stock was expected to open around $350 on Wednesday, or 40% higher than its reference price.
Some bulls predict a market capitalization of $100 billion or more, making it larger than ICE, Nasdaq, CME Group CME, and Cboe Global Markets CBOE.
David Trainer, CEO of the investment research firm New Constructs, said the crypto platform’s value is ridiculously high.
“Even though Coinbase’s revenue surged over the past 12 months, the company has little to no chance of meeting the future profit expectations that are baked into its ridiculously high expected valuation of $100 billion,” he said.
“Coinbase’s expected valuation of $100 billion implies that its revenue will be 1.5 [times] the combined 2020 revenues of two of the most established exchanges in the marketplace,” namely, NYSE parent ICE and Nasdaq.
Trainer said that, based on his calculation, Coinbase’s valuation should be closer to $18.9 billion — an 81% decrease from the $100 billion expected valuation.
Validation for crypto or a top?
Some bulls see Coinbase’s IPO as a stamp of approval for the burgeoning cryptocurrency industry.
“We look at the Coinbase listing as an additional validation of the space, and a big PR opportunity for the entire industry to shine as the future of finance,” said Alex Mashinsky, CEO of crypto lending and trading platform Celsius Network.
Coinbase, he said, “has more users and more revenues than many of the largest Wall Street players and is more profitable than any major exchange, and this validation puts most skeptics at a crossroads of having to re-evaluate their denial and frustration with the disruption coming at them from all sides.”
Others suggest that it may prove a new top for the market and put crypto prices under pressure after a precipitous rally in recent days and a fresh record for bitcoin.
Is Coinbase the largest crypto exchange?
Coinbase is the second largest crypto platform, but the largest in the U.S., by volume.
The title of largest goes to Binance, which sees $47 billion in crypto trading volume in a 24-hour period, according to CoinMarketCap.com.
Who else owns Coinbase?
Venture-capital firm Andreessen Horowitz is the largest owner of Coinbase, holding about 25% of Class A shares and 14%% of Class B. Marc Andreessen, head of the venture-capital outfit, sits on Coinbase’s board.