Bitcoin has topped $63,000, up from $29,000 at the beginning of the year, and Coinbase recently announced that first-quarter sales will be about $1.8 billion, exceeding the company’s overall revenue for the entire year of 2020. The Nasdaq ticker for Coinbase is ‘COIN.’ As the digital currency exchange makes its much-anticipated debut on Wall Street, Wall Street is still waiting for the first transaction. Coinbase made a splash on Wall Street, with the first sale of $381 putting the digital currency exchange’s market cap at $100 billion. Since Coinbase’s fortunes are closely linked to Bitcoin, the most successful cryptocurrency, some see the company’s IPO as a watershed moment for digital currencies. With cryptocurrency buzz seemingly everywhere, including at the US Federal Reserve, Coinbase Global Inc. is launching an initial public offering of stock on Wednesday. Major companies such as Tesla, PayPal, and Visa are integrating digital currencies into their business plans and accepting them.
The Coinbase IPO “could be a landmark event for the crypto industry, and it will be something the Street will be laser focused on to gauge investor appetite,” wrote Wedbush analyst Daniel Ives this week. In 2020, Coinbase had 43 million confirmed users, with 2.8 million making monthly transactions. Last year, the company’s sales more than doubled to $1.14 billion, and it turned a $322.3 million profit after losing tens of millions in 2019. In the first quarter of 2021, it is expected to raise sales to $1.8 billion and net income to $730 million to $800 million. Bitcoin, the most common digital currency, and Etherium, another popular cryptocurrency, are crucial to Coinbase’s success. Bitcoin soared above $63,000 on Tuesday, after beginning the year about $29,000.
Any transaction that passes through Coinbase’s framework receives it 0.5% of the value. Coinbase makes 50 cents for every $100 spent on Bitcoin. If the price of Bitcoin or Etherium falls, so do the fees Coinbase receives, exposing it to the rise and fall of digital currencies. Coinbase can deal with what appear to be unusual assets in certain respects, but its business model is fairly standard. A business that deals in cryptocurrency, which is often used to circumvent institutional monetary processes and control, is an unusual match for a publicly traded company that is required to file quarterly reports with regulators. Coinbase, on the other hand, said it will go public through a direct listing when it filed papers with the US regulators this year to go public. That means it has avoided the usual deals with large banks to buy and promote thousands of shares.
Insiders and early investors will turn their stakes in the business into publicly traded stock via a direct listing, which will go public on Wednesday with no fixed price, as is customary when big banks handle an IPO. This might result in wild price fluctuations when the stock market opens. Nasdaq set a $250 reference price for the stock this week. That’s not going to work out. Spotify, a music streaming service, was listed in 2018, followed by Slack, a messaging service, in 2019, and Palantir Technologies, a data-mining firm, in 2020. According to Lule Demmissie, president of Ally Invest, Coinbase shares, which will be traded on the Nasdaq under the ticker ‘COIN,’ will draw investors who want to get into the cryptocurrency space in addition to, or without purchasing any coins at all. “This may also be a less unpredictable protection than the coins themselves,” Demmissie speculates. Based on private transactions of its stock, some Wall Street analysts believe Coinbase Global Inc may be worth $100 billion.
That would put it in the top 100 most valuable publicly traded companies in the United States, dwarfing Nasdaq Inc., which operates the Nasdaq Stock Market, and Intercontinental Exchange, which owns the New York Stock Exchange. Despite this, not everybody is sold on the Coinbase hype. Coinbase has “little-to-no chance of achieving the potential profit targets, that are built into its ridiculously high valuation,” according to David Trainer, CEO of investment consulting company New Constructs. Trainer valued Coinbase at $18.9 billion last week, claiming that as the cryptocurrency industry matures, it will face more competition. Coinbase, on the other hand, is a window into the future, according to Wedbush analyst Ives. “Coinbase is a foundational piece of the crypto ecosystem, and it serves as a barometer for the growing mainstream acceptance of Bitcoin and cryptocurrency in the coming years,” Ives said.
