Coinbase Global Inc is an online cryptocurrency platform (great, that clears that up then!)
The company, which lists today in New York with a US$65bn valuation, describes its platform as “the easiest place to buy and sell cryptocurrency”.
Launched in 2012 by founder and chief executive Brian Armstrong, now aged 38, Coinbase was an established in the early days of cryptocurrency trading.
It allows its customers to exchange bitcoin and the gamut of cryptos including Ethereum, XRP, Litecoin, Dogecoin and many others.
Like a stock market brokerage platform it charges customers a transaction fee. It also provides crypto-wallet services which essentially allows customers to ‘store’ their crypto assets. At the same time, business-to-business services – including prime brokerage and custody – similarly draw parallels to a stockbroking business model.
Whilst the customer-facing services are akin to a brokerage, others prefer to compare Bitcoin to exchanges like the Nasdaq, CME or the Intercontinental Exchange (ICE) given that it is the dominant platform for crypto transactions, by volume.
Wednesday’s stock market debut comes via a ‘direct listing’ which basically means there’s no share sale or fundraising, so its not an ‘IPO’, and on Tuesday evening it was given a reference price if US$250 per share.
Coinbase stock will trade on the Nasdaq with the ‘COIN’ ticker symbol.
Dominant Bitcoin exchange
Coinbase boast some 56mln verified users, according to the company’s website, and it highlights US$335bn worth of transactions per quarter and it has some US$223bn of assets on the platform.
The company claims the platform has 7,000 institutions and 115,000 ‘ecosystem partners’ in over 100 countries.
It employs 1,700 people and it describes itself as a decentralized company with no headquarters – albeit until recently San Francisco was considered the HQ. It also has offices in New York, Portland, London, Dublin, Tokyo and Singapore.
Crypto proponents believe the float will be a “coming out party” for the industry.
The resulting US$65bn market valuation would give Armstrong an estimated net worth of around US$6.5bn.
The stock market debut will be very closely watched not least because of the heat around new listings and the fervent interest in crypto-trading that seems to see some digital token set new record highs on an almost daily basis.
Sceptics say the valuation is way too high. For context, one analyst cited by MarketWatch noted predictions that Coinbase could soon rise to a US$100bn valuation which would put it on a revenue multiple equating to 1.5x of the Nasdaq and ICE combined.
Another analyst, meanwhile, told MarketWatch they were ‘super super bullish’ and pitched a US$600 per share price target.
Bull or bear, almost all commentators see Coinbase as a volatile stock in its early days on the market.
Huge interest as a Bitcoin proxy
There aren’t very many easy ways for regular investors to play Bitcoin without dipping toes into the gray and/or unregulated waters of crypto trading.
Whilst there’s increasingly a move towards acceptance of bitcoin and other major cryptos amongst the financial services establishment, your ability to buy and sell bitcoin (or more accurately the legal and regulatory status of such transactions) can vary significantly depending upon where you are in the world. Similarly, professional investors and fund managers may typically be constrained by their compliance departments and investment mandates.
Let alone such Poindexter technicalities, the US$50,000+ per unit pricing of whole bitcoins is another awkward factor for retail investors at least.
This all adds up to high demand for any investment proxy for Bitcoin specifically and cryptocurrencies generally.
Exchange traded fund operators, for example, have recently been successful in providing such a route for investors. BTCetc, a HAN ETF facilitated bitcoin ETF listed in Germany, has so far attracted more than US$1bn.
Meanwhile, in New York this week, the SEC said it had begun a bitcoin ETF application by WisdomTree which is added to a similar pending application made by Van Eck which is also under review by the US regulator.
Pressure has been mounting on the SEC to grant approval with the surge in popularity of bitcoin over the past six months.
Mainstream investment giant Fidelity has filed with the SEC to launch a bitcoin ETF under the Wise Origin brand with commentators expecting a flood of other Wall Street heavyweights to follow suit once one is approved and the points of reference established.
Coinbase won’t track the bitcoin price as such, at least not directly, though its share price is very likely to move in-step with trading activity levels for bitcoin and cryptocurrencies more generally.
It is not an IPO
Part of a growing trend, Coinbase is coming to market without an IPO.
Instead, it joins the Nasdaq with a ‘direct listing’ whereby the firm floating simply opens its existing shares for public trading.
A direct listing also does not involve underwriters, along with the fees they incur, or an IPO price for the shares that is designated by the underwriting bank to attract interest from potential investors.
Instead, in a direct listing, the stock exchange will designate the shares with a “reference price”, usually based on the value the stock traded for on the private market, as a benchmark for potential buyers.
This usually means shares in a direct listing do not see the “pop” associated with IPO listings.
Coinbase is not the first firm to use a direct listing to go public, with online video game platform Roblox Corp (NYSE:RBLX) making its debut on the New York Stock Exchange in March using the same method.
Perhaps unsurprisingly, Coinbase is already a feature on the WallStreetBets forum on Reddit.
Coinbase has the potential to be a very popular cross-over between meme-stock and a crypto-punt, both of which have proven particularly potent in the emerging retail investing counterculture on Reddit.
The winning formula would go something like this: bandwagon + cryptocurrency angle + ‘establishment’ naysayers = Reddit lols and retail trading.
Whichever side of the Atlantic you sit, you’re going to see, hear and read an awful lot about Coinbase going forward. If there were still watercoolers to talk around, the conversations would eventually touch on bitcoins and cryptocurrency.
It has reached a small-talk-at-family-barbeque level of the public consciousness. If it hasn’t happened already, it might only be a matter of time until a cousin, uncle, neighbor lets you know that they’re “checking their Coinbase”.
Story by ProactiveInvestors
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