Coinbase Skyrockets In Nasdaq Listing, Landing $105 Billion Valuation On First Day Of Trading - Forbes

boonoor.blogspot.com

Topline

Shares of Coinbase, the nation’s largest crypto exchange, skyrocketed nearly 60% within minutes of their public-market debut on Wednesday, propelling the nine-year-old company’s market capitalization to more than 12 times its last private valuation of $8 billion in 2018 and marking another instance of booming demand lifting the still-nascent cryptocurrency space to meteoric highs.

Key Facts

Listed on the Nasdaq exchange under the ticker COIN, shares started trading at about 1:30 p.m. EDT Wednesday and immediately surged to a price of more than $398, eclipsing the $250 reference price set on Tuesday.

The soaring stock price boosted the firm’s market capitalization to roughly $105 billion, making Coinbase one of the 100 most valuable publicly traded companies in the United States and more valuable than both New York Stock Exchange parent Intercontinental Exchange and Nasdaq Inc.—combined.

Eschewing the traditional initial public offering that enlists investment banks as intermediaries and underwriters to sell shares ahead of trading, San Francisco-based Coinbase opted instead for a direct listing, selling 114.9 million shares on Wednesday directly to the public.

“I wanted there to be just a true market on day one that set the price, not something that was set behind closed doors,” Coinbase's billionaire CEO, Brian Armstrong, said on CNBC Wednesday, calling the direct listing “more true to the ethos of crypto.”

Ahead of its listing, Coinbase reported first-quarter revenue that climbed nearly 900% from $190.6 million in the same period last year, blowing past the $585 million it nabbed in the fourth quarter.

Update 5 p.m. EDT: Coinbase shares closed Wednesday at a price of roughly $328, up 31% from the reference price and giving Coinbase a market capitalization of about $86 billion.

Crucial Quote

“The Coinbase [listing] is a watershed moment and historical event for the crypto industry and something Wall Street will be laser-focused on to gauge investor appetite going forward,” Wedbush Analyst Dan Ives said in a Wednesday morning note to clients, calling Coinbase a “barometer” for growing mainstream [crypto] adoption.

Key Background

Coinbase’s foray into the public market comes after a massive year of growth for cryptocurrencies, fueled by inflationary concerns and heightened institutional adoption. Morgan Stanley and Goldman Sachs started offering cryptocurrency to their wealthy clients just last month, and companies like Tesla, MicroStrategy and payments fintech Square have purchased billions of dollars of bitcoin as a means to diversify their largely U.S. dollar-based balance sheets. Up a staggering 825% over the past year, bitcoin hit its latest high, of just under $65,000, early Wednesday morning. The total cryptocurrency market is worth more than $2.2 trillion.

Chief Critic

“Even though Coinbase’s revenue surged over the past 12 months, the company has little to no chance of meeting the future profit expectations that are baked into its ridiculously high expected valuation of $100 billion,” says David Trainer, the CEO of investment research firm New Constructs. “The crypto markets are very young, and we expect many more companies to compete for the profits Coinbase enjoys today.”

Tangent

Coinbase joins a growing rank of buzzy tech companies that have started trading over the past year—to varying degrees of fanfare. Gen-Z gaming platform Roblox, which similarly opted for a direct listing, jumped more than 50% on its first trading day in January and has since climbed about 6% higher. Airbnb and Doordash debuted in December, and both roughly doubled on their first day of trading, but Airbnb has jumped about 25% since then, while DoorDash has tanked 23%.

What To Watch For

Crypto regulation. “With cryptocurrencies’ astronomical price jumps, and as they become increasingly embedded in the global financial system, investors must expect much greater government scrutiny,” Nigel Green, the CEO of $12 billion advisory deVere Group, said in a Wednesday note, adding that Coinbase’s direct listing will help the firm reach a wider investment base other than “the usual crypto evangelists.” Gary Gensler, a blockchain and cryptocurrency professor at the MIT Sloan School of Management, was confirmed as the Securities and Exchange Commission’s new chairman on Wednesday, and one SEC official has said he’s “sympathetic to the call for regulatory clarity” in the space.