Coinbase is the talk of Wall Street as the largest crypto platform in the US gears up for its public debut on a traditional exchange Wednesday, via direct listing.
There is no doubt that Coinbase’s public offering is a big deal in the world of crypto. The company was founded a little over ten years ago with the emergence of bitcoin BTCUSD,
and is now in the midst of a moment described by many in the industry as a tipping point.
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There are a few ways to take ownership of cryptocurrencies right away, other than by buying them directly, a service that Coinbase offers for a fee, which investors seem willing to pay for.
Coinbase, whose users mainly trade in bitcoin and ethereum, reported last week that its revenue increased 847% in the first quarter to $ 1.8 billion, and it now has 56 million verified users.
Leeor Shimron, an analyst at FundStrat Global Advisors, described the Coinbase listing as groundbreaking. “Coinbase’s direct listing is a watershed moment for the crypto industry.”
Wedbush analyst Dan Ives said the listing reflects the regular evolution of the cryptocurrency.
“Coinbase is a fundamental part of the crypto ecosystem and, in our opinion, is a barometer of the growing mainstream adoption of Bitcoin and crypto for years to come,” he wrote in a research note on Tuesday.
Some warn that implicit valuations for Coinbase as a crypto exchange are too high, compared to traditional exchanges such as Nasdaq Inc. NDAQ,
where Coinbase will list directly, and Intercontinental Exchange ICE,
the parent company of the New York Stock Exchange.
In a direct listing, a company lists its shares on an exchange, but without hiring banks to insure the transaction, such as with an IPO.
Here’s what you need to know about the upcoming offering.
What is Coinbase?
The Silicon Valley crypto exchange was co-founded in 2012 by Brian Armstrong, 38, who runs the platform as CEO. Fred Ehrsam, a Coinbase president, also helped set up the company.
According to Forbes, Armstrong’s net worth is currently $ 6.5 billion based on his ownership in the company, and his net worth is likely to increase if direct listing successfully commences.
When will Coinbase go public?
Coinbase will be released on April 14. The exact timing of the list is not clear though Palantir Technologies Inc..’s PLTR,
September’s direct listing saw its first trading after 1:30 pm Eastern Time.
Where is it listed?
Coinbase will be made public on the Nasdaq under the ticker symbol “COIN” as a direct listing, meaning it will not raise new money like a company would on a traditional IPO.
Coinbase is the Nasdaq’s first major direct offering, with Spotify SPOT,
Slack Technologies WORK,
and most recently Palantir Technologies PLTR,
all of which choose to list directly on the NYSE.
Nasdaq gave Coinbase a reference price of $ 250 a share on Wednesday evening, valuing it at more than $ 65 billion.
Some bulls forecast a valuation of $ 100 billion or more which would make it bigger than a number of US stock exchanges including ICE, Nasdaq, CME Group CME,
and Cboe Global Markets CBOE,
David Trainer, CEO of New Constructs, an investment research firm, said the value of the crypto platform is ridiculously high. “While Coinbase’s revenues have skyrocketed over the past 12 months, the company has little to no chance of meeting the future earnings expectations baked into its ridiculously high expected valuation of $ 100 billion,” he said.
Coinbase’s projected valuation of $ 100 billion implies that revenue will be 1.5x the combined 2020 revenues of two of the most established exchanges in the market, Nasdaq Inc. (NDAQ) and Intercontinental Exchange (ICE), New York’s parent company. Stock market, ”he said.
Trainer said that based on his calculation, Coinbase’s valuation should be closer to $ 18.9 billion – an 81% drop from its projected $ 100 billion valuation.
‘Not for the faint of heart’
MoffettNathanson analyst Lisa Ellis explained to MarketWatch why the offering, as she describes it, is “ not for the faint of heart, ” but why she started the exchange with a buy with a price target of $ 600, even before it sees its first. trade on the Nasdaq.
“I’m super super bullish on Coinbase … because you get the feeling that they are a leader in the space and crypto-agnostic,” she said.
That said, she acknowledges that currently 90% of Coinbase’s revenue comes directly from retail, with most in the US and commerce primarily focused on the two largest cryptos: bitcoin and Ether ETHUSD,
on the ethereum blockchain.
“So the implications are that Coinbase’s earnings are correlated with the level of activity in cryto-currencies and especially bitcoin and ether.”
Ellis says investors need a long-term investment strategy of at least one year in bitcoin, which could still drop to zero through some bearish accounts, but a three-year outlook is even better as the crypto complex tends to operate in three years. cycles of boom and then failure.
Validation for crypto or a top?
Some bulls see Coinbase as validation for the emerging crpyto industry.
Alex Mashinsky, head of crypto lending and trading platform Celsius Network, put it this way:
“We view the Coinbase listing as an additional validation of the space and an important PR opportunity for the entire industry to shine as the future of the financial world,” he told MarketWatch via email.
Coinbase has more users and more revenue 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 and needs to re-evaluate their denial and frustration with the disruption that has occurred on it. coming down from all sides. “
Others suggest it could set a new top for the market and put pressure on crypto prices after a steep rally in recent days and a new record for bitcoin.
Yves Lamoureux, the president of Montreal-based macroeconomic research firm Lamoureux & Co., told MarketWatch that he is concerned that too much euphoria exists around bitcoin and crypto and that a cut should take place as a result. “Can you find someone there with a negative point of view?” he asked. “A resounding no,” said Lamoureux.
Is Coinbase the Largest Crypto Exchange?
Coinbase is the second largest crypto platform, but the largest in the US by volume. The title of the 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, with approximately 25% of the Class A shares and 14% of the Class B. And Marc Andreessen, head of the venture capital organization, sits on Coinbase’s board.
For those who want an even deeper dive into Coinbase, check out MarketWatch’s 5 Things You Should Know About the Company.