- >The Broader Implications of Coinbase Going Public
The Broader Implications of Coinbase Going Public
Cryptocurrency exchange Coinbase Global, Inc. went public earlier this month after a hotly-anticipated listing since December 2020. The New York Times described the listing as a “cryptocurrency coming-out party,” with the Washington Post calling it a “landmark market debut” in a nod to the major milestone it represents for the cryptocurrency ecosystem.
The move was on a day when Bitcoin and Ethereum, the two largest cryptocurrencies, rallied to fresh all-time highs of $64,863 and $2,399, respectively, per CoinMarketCap. Coinbase, which had floated 114.9 million shares, saw the share price close at $328.28, snagging an $85.8 billion market valuation.
Coinbase stock, which traded with the ticker symbol ‘COIN’, had been given a reference price of $250 by Nasdaq. However, no shares exchanged hands at that price. The opening price was $381, before quickly climbing to $429.54. At one point, it dropped to a low of $118 before rising again to end the session at just below $330. It’s currently trading around $300.
Hope Mutie | Apr 28, 2021
Big Deal for Crypto
Coinbase making its public debut is a watershed moment for not just the company, but the entire crypto industry. Crypto was never a favorite for governments and has had to weather serious headwinds in its 12-year history. It’s been lambasted as a currency for criminals and the darknet.
But the biggest fear of the establishment was that it could upend the traditional financial system due to its decentralized, censorship resistant-resistant nature. As a result, crypto has been treated with varying degrees of enthusiasm.
But the listing should shut up the skeptics if the recent institutional Bitcoin wave has not. The US’s largest crypto exchange trading publicly is a huge deal. Everyone – investors, regulators, and the media will recognize crypto as not just a fringe niche but a legit sector that can go head-to-head with conventional players.
It’s definitely a win for investors with cold feet about Bitcoin. Instead of investing in the currency directly, they can bet their luck with Coinbase stock, even if its fortunes hinge on Bitcoin’s performance. What’s more, new investors will be emboldened to see crypto as a credible way to store, save and own wealth. It’s also safe to bet that more Wall Street players will be taking the crypto plunge from here on out.
With the move, Coinbase has set a precedent for other crypto businesses to follow. San Francisco-based Kraken – a top-five exchange by volume, has expressed intentions to follow Coinbase’s footsteps. Crypto-friendly trading platform eToro is planning to take it public through a $10 billion SPAC merger with FinTech Acquisition Corp. V.
The Long Road To Adoption
Coinbase signaled its desire to go public as early as January. In a blog post, the company announced the wish to “become a publicly-traded company pursuant to a proposed direct listing of its Class A common stock.” In February, the company followed up with a Form S-1 filing with the Securities Exchange Commission (SEC). S-1 is a requirement by the SEC for any company wishing to go public. The document must have information such as the company’s financial position and potential investing risks.
Investors can use the form to assess a company’s merits before the IPO issuance.
Coinbase even sent a copy of the filing to Satoshi Nakamoto, the mysterious creator of Bitcoin – as a nod to what he/she/they started. The company also acknowledged the risk factor of Satoshi’s identity becoming known, as well as the potential movement of the 1.1 million Bitcoin trove believed to be theirs. Coinbase admitted either of those events could cause a destabilization to Bitcoin’s value.
On April 1, Coinbase announced that the SEC had given a nod of approval to their S-1 form, clearing the way for the proposed direct listing. Additionally, its Class A common stock would begin trading on Nasdaq on April 14.
An IPO, But Not Really
Notably, Coinbase took the path of a direct listing instead of a traditional IPO. In a direct listing, a company doesn’t create new shares. Instead, only existing shares are put up for sale. Usually, a traditional IPO involves creating new shares that are then underwritten by an intermediary – such as a bank – who then distribute them to their networks.
Direct listing has risks, but it also helps a company avoid dilution of their shares. Also, it’s possible to circumvent the oft demanding and expensive path of an IPO.
Coinbase joins office messaging platform Slack, audio streamer Spotify, and big data company Palantir Technologies, all of which went public via a direct listing.
What is Coinbase?
Coinbase is a cryptocurrency exchange – the biggest and most successful in the US. It’s a brainchild of former Airbnb software engineer Brian Armstrong and former Goldman Sachs forex trader Fred Erhsam. The company launched in 2012 and has only risen and risen.
Today, they have 56 million ‘verified’ users across over 100 countries. Per the S-1 filing, the company made $322m in net income last year. In the 1st quarter of 2021, it shattered those numbers with an estimated net income of at least $730m.
Coinbase likes to stay on the good side of regulators. For example, it avoids listing privacy coins (which the US government isn’t a fan of) and controversial coins like Tether (which has been in the SEC’s crosshairs).
But despite its squeaky clean relationship with regulators, Coinbase hasn’t exactly emerged reputationally unscathed. For instance, it’s been on the spot for allegedly underpaying black and female employees. Armstrong also ruffled feathers after declaring Coinbase an apolitical zone. Many people also think Coinbase is in it just for the money and has done nothing for the health of Bitcoin – whose back it’s ridden on. Others feel the platform’s fees are too expensive.
Whatever the varying viewpoints, Coinbase has offered a safe platform for millions to buy and sell crypto. It’s one step closer for people to exercise autonomy over their financial lives and participate in the crypto evolution.
The Coinbase listing helps push crypto closer into mainstream acceptance. In the near future, we can expect to see more of such exciting developments in the space. In short: The future of cryptocurrency just got more interesting.