Coinbase’s IPO Is Next Week
Coinbase Global, the leading cryptocurrency exchange in the United States, would certainly be one of the most high-profile public listings to enter the market this year. The Securities and Exchange Commission approved Coinbase’s direct listing last week, and shares are set to begin trading on the Nasdaq exchange on April 14 under the ticker COIN.
Coinbase would avoid the conventional IPO process of recruiting investment banks to generate interest and support the transaction. Instead, Coinbase Global plans to post its shares straight on the Nasdaq stock exchange via a so-called direct listing, a technique pioneered by big names like Spotify and Palantir in recent years.
Coinbase has listed 114,850,769 shares of stock, but it’s not know how many will be available for purchase, and the company hasn’t revealed a proposed stock price. In the private markets, Coinbase is valued at about $68 billion, but that figure increases to more than $100 billion when all of Coinbase’s shares are completely distributed.
What is Coinbase?
Despite the fact that cryptocurrencies such as Bitcoin have grown in popularity in recent years, they are still not widely accessible. For the vast majority of cryptocurrency investors, this involves using a website that helps them to buy and sell digital currencies. Coinbase does that.
The company provides an exchange and a digital wallet to make it simple for the average investor to purchase cryptocurrency. It does not end there. Coinbase Pro provides advanced charts and more complex trading tools for more experienced users.
Coinbase has over 56 million individual users, 7,000 institutions, and 115,000 partners in over 100 countries, giving the site an unrivaled community that appeals to cryptocurrency enthusiasts at all levels.
The company says its platform has never been hacked
Coinbase has been effective in keeping its users’ personal information secure. Many similar cryptocurrency exchanges have disappeared, and many have failed the test of protecting their users’ accounts.
The 2014 hacking of the Japanese exchange Mt. Gox, which resulted in the company’s bankruptcy and the loss of billions of dollars in Bitcoin, was one of the most dramatic failures. And there are more examples as such.
Coinbase has performed in 2020
Coinbase posted $1.14 billion in sales for the fiscal year ending December 31, 2020, a 139% increase over 2019. This contributed to a $322 million net profit, up from a $30 million loss in 2019.
The company’s 2020 client metrics were quite compelling. Coinbase registered 43 million confirmed users at the end of the year, an increase of 34%, while the number of monthly transacting users increased by 180% to 2.8 million. This increased the company’s net assets to more than $90 billion, a 432% increase from approximately $17 billion in 2019. Trading volume increased significantly as well, increasing 142% from $80 billion to $193 billion.
And the first quarter of 2021 is fantastic
This past week, Coinbase published preliminary results for the first quarter of 2021, and the figures were mind-blowing. Revenue increased ninefold from $190.6 million in the 2020 quarter to $1.8 billion, tripling concurrently and exceeding revenue for the entire year. Net income exploded as well and is projected to be in the $730 million to $800 million range, reflecting a nearly 2,300% rise at the middle point of its range.
The crypto exchange registered 56 million confirmed users, up from 43 million at the end of 2020, a more than 30% rise in just three months. Development is obviously increasing, with its most recent client growth coming on top of a 34% rise for the entire year. Monthly transacting users more than doubled to 6.1 million, up 118% from 2.8 million at the end of 2020.
IPO vs. DPO
As FX-Finances has announced on April, the 2nd Coinbase executives preferred a direct public offering over an initial public offering, the conventional path to public markets (DPO). This alternative has many advantages over the more common course.
Businesses hire investment bankers to manage the public offering as part of the IPO process, serving as intermediaries for institutional investors and also helping to set the stock price by deciding what investors are willing to pay for the share.
Management embarks on a roadshow, which is a series of financial presentations made to the investment community, as part of the proceedings. The aim is to clarify the company’s business model, as well as provide its operating history and potential prospects, as well as estimate its target market. All of this helps to generate awareness and demand for the stock before it goes public.
A business that chooses a DPO usually isn’t trying to raise capital to finance its ongoing operations, so no new shares are needed. Going public through this method helps early investors and business insiders to cash in on some of their investments by selling stock on the first day of trading without being bound by the traditional lockup period. It also avoids the depletion associated with a conventional IPO.
By having a DPO, the company assumes more of the planning (and risk). However, there are other advantages, as the switch will save the business hundreds of millions of dollars as opposed to a traditional IPO, which typically costs between 3.5% and 7% of the total IPO revenues.