Coinbase, one of the biggest cryptocurrency exchanges in the world, will launch its much-anticipated initial public offer (IPO) on 14 April. The shares will be listed on Nasdaq under the market symbol ‘COIN’, and experts say the company might go public at a valuation of $100 billion.
Instead of the conventional IPO process, the company has chosen to go for a direct listing, where existing shareholders can sell their shares directly on the exchange. New investors, including those from India, can start purchasing shares of the company as soon as the listing takes place.
Founded by Brian Armstrong and Fred Ehrsam in 2012, the company is a leading provider of end-to-end financial infrastructure and technology for the crypto-economy.
According to Forbes, Armstrong, the chief executive officer of the company, is the second-richest crypto billionaire in the world with a net worth of $6.5 billion, while Ehrsam, who left the company in 2017 but remains a board member, is worth $1.9 billion, as of 5 March 2021. Here’s what to know about Coinbase.
Coinbase last week reported $1.8 billion in revenue in the first quarter of the year compared with the $1.3 billion for all of 2020. As of March end, the company had more than 56 million verified users with a quarterly trading volume of $335 billion. The total worth of assets on the platform reached $223 billion during the first quarter of the calendar year 2021, representing 11.3% crypto asset market share.
Since inception through December 31, 2020, the company has generated over $3.4 billion in total revenue, largely from transaction fees that we earn from volume-based trades on the platform by retail users and institutions.
All of the company’s sources of revenue are dependent on crypto assets and the broader crypto-economy. Due to the highly volatile nature of the crypto-economy and the prices of crypto assets, the results will continue to, fluctuate significantly from quarter to quarter in accordance with market sentiments and movements in the broader crypto-economy.
The company in an SEC filing highlighted that if demand for bitcoin and ethereum declines and is not replaced by new demand for crypto assets, the business, operating results, and financial condition could be adversely affected.
“We are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition,” the company said in a filing.
Coinbase also expects that its operating expenses will increase significantly in the foreseeable future and the company may not be able to achieve profitability or achieve positive cash flow from operations on a consistent basis.
Should you invest?
As the company has chosen to go with a direct listing, the listing price of the stock is not yet known. Indian can invest in the stock as soon as it gets listed on Nasdaq on 14 April. However, experts suggest retail investors exercise caution while going for newly listed stocks.
“For Coinbase, there is always a regulatory risk. The risk may not be for the exchange per se, but its volumes are coming from certain activities, and some of those activities might face hurdles in the future. Moreover, there’s no reason for investors to get excited about a company in an IPO. You always invest in a good company later,” said Vikas Gupta, founder, Omniscience Capital, a Sebi-registered investment adviser, which also advises on foreign stocks.