After years of being shunned on Wall Street and by traditional financial markets, bitcoin and cryptocurrencies are finally enjoying their moment in the sun. Bitcoin price is currently trading within touching distance of its $61,000 all-time high set in March, a far cry from its $3,000 price just a year ago. Bitcoin owes its mad rally to increasing acceptance by Wall Street and some of the world’s biggest and most recognizable institutions and companies such as Visa Inc. (NYSE:V), Square Inc. (NYSE:SQ), PayPal Holdings (NASDAQ:PYPL) and Tesla Inc.(NASDAQ:TSLA).
Which makes the looming public listing of the world’s biggest crypto exchange all the more compelling.
Giant cryptocurrency exchange, Coinbase Global Inc., is about to become a public company--a first for a cryptocurrency exchange.
Coinbase will list on the tech-heavy NASDAQ platform with an implied $68 billion valuation, a huge increase from its valuation only a few years ago.
But investors who can’t wait to make a killing on Coinbase’s listing will have to wait a little longer: Coinbase will go public through a direct listing and not the usual Initial Public Listing (IPO) process, taking a leaf from the likes of Palantir (NYSE:PLTR), Spotify (NYSE:SPOT) and Slack (NYSE:WORK).
Direct listings simply mean that early investors and employees get a chance to convert their ownership stakes into stock. With direct listings, no underwriters are involved and no new shares are created with only existing, outstanding shares sold.
Coinbase could not have chosen a better time to go public, with the latest valuation based on a recent revised S-1 filing released Wednesday showing that the company’s private shares were trading at $343.58 apiece for the first quarter of 2021, a 1,300% increase from a year ago.
That gives the company a valuation of $68B vs. $8B in October 2018 according to PitchBook Data.
Coinbase’s revised regulatory filing reveals that the company had more than 196 million shares outstanding in Q1 2021. Nasdaq will use that information to set a reference price for the shares ahead of the listing.
But other than the ongoing crypto mania, there’s another-- even better--reason for Coinbase’s meteoric rise in valuation--solid financials.
The company reported profit of $322 million on revenue of $1.1B in its first public filing in February, good for a 100% top line increase compared to the previous year.
But that’s just one of several factors working in Coinbase’s favor.
Hot on the heels of the Coinbase IPO is Bakkt, another crypto exchange which recently announced plans to go public via a SPAC merger.
Other unicorn listings that took place last year including Airbnb Inc. (NASDAQ:ABNB), the popular online home rental marketplace, and DoorDash Inc. (NYSE:DASH), an On-Demand logistics based startup, have been home-runs with ABNB stock up nearly 160% and DASH having gained 90% since their respective IPOs.
Airbnb is currently valued at $19.8B, significantly higher than the valuation of older peers such as Booking Holdings (NASDAQ:BKNG) and Expedia Group (NASDAQ:EXPE) with market caps of $98.2B and 25.4B, respectively.
Being the first crypto exchange to go public, it’s hard to project how the market will value Coinbase.
But working in its favor, Coinbase has been consistently profitable for years, something few unicorns including Airbnb and DorDash can lay claim to.
That said, Coinbase still has to clear several hurdles before it can finally join the thousands of other companies in the public arena.
That said, Coinbase’ listing is not without some controversies.
After all, Coinbase is not a stranger to heavy scrutiny by regulatory authorities.
Indeed, Coinbase has had to deal with regulator scrutiny over the years, including having to submit information on 13,000 customers accounts to the IRS in 2018 who held more than $20,000 in cryptocurrencies between 2013 and 2015.
Further, Coinbase has had to deal with its fair share of disgruntled customers, with Mashable in 2018 uncovering more than 115 customer complaints over issues ranging from site outages and missing funds to lack of customer service.
Coinbase has frequently suffered website outages at critical times including during periods of heavy trading with the outages becoming a reputation hazard for the exchange. Further, Coinbase’s recent decision to halt trading in XRP on Jan. 19 due to the latter’s spat with the SEC has rubbed dozens of customers the wrong which would lead to drawn out court cases.
Given its checkered track record, not least because it’s a big and highly prominent cryptocurrency company, Coinbase might find itself encumbered with regulatory red tape that could lead to many months elapsing before the SEC finally gives the nod for the much-awaited listing.
But crypto bulls have been waiting for this moment for years, and waiting for several more months or maybe even a year cannot hurt too much. In fact, some crypto insiders have welcomed the imminent regulation, seeing it as another step in the crypto legitimization drive which is likely to attract more institutional capital to the industry.
As Flori Marquez, founder of crypto lender BlockFi, has aptly put it:
“There’s been an increased focus on regulators, in terms of looking at this asset class. To know that you have a crypto company in front of the SEC, having active conversations in terms of thinking, How do we make it easier for U.S. consumers to invest in this asset class, is just huge news for the space as a whole... I think it bodes extremely well for future development within bitcoin and what companies can do in the space going forward.”
But overall, there’s little reason why Coinbase is not poised for another home run.
By Michael Kern for Safehaven.com