Coinbase Stock to Debut Directly on the NASDAQ

April 09, 2021 09:51 UTC

Coinbase stock is due to be listed on the NASDAQ stock exchange imminently. But what can you expect from this new listing? In this article, we will take a look at the upcoming Coinbase IPO and tell you everything you need to know about the company behind the listing!

What Is Coinbase?

If you want to own Bitcoin, you have two options. You can either mine the cryptocurrency, which requires incredibly advanced technical knowledge and the expense of considerable sums of money in the process, or, alternatively, you can create an account with a cryptocurrency exchange and buy some.

Enter Coinbase, which was founded in 2012 and is the largest US cryptocurrency exchange platform by trading volume. It is also the first to go public.

Coinbase allows its users to buy and sell over 45 different types of crypto assets on its popular trading platform, as well as providing them with a free wallet service to store their cryptocurrencies. 

It has also recently released Coinbase Cards - physical debit cards which can be funded by a user’s crypto assets and used anywhere which accepts payment by Visa.

How Does Coinbase Make Money?

Coinbase generates the vast majority of its revenue through transaction fees, which are incurred any time a user buys, sells or withdraws crypto assets. These fees accounted for almost 86% of total revenue in 2020.

It also earns money through its subscription products, which include providing online retailers with the necessary software to enable them to accept payments via cryptocurrency. Whilst this line of business only accounted for 3.5% of total revenue in 2020, it has grown more than 125% since the previous year.

Company Performance and Outlook for Coinbase Stock

Based on a recent private market share sale, a report by Axios estimated Coinbase’s value to be over $100 billion. If this valuation is accurate, it would give Coinbase the highest initial valuation of any US tech company to go public since Facebook.

This figure is all the more remarkable considering that the company was valued at around $8 billion in October 2018.

According to their most recent filing with the Securities and Exchange Commission (SEC), Coinbase has 43 million verified users, of which 2.8 million conduct monthly transactions.

Coinbase had a enormously successful year in 2020, generating total revenue of almost $1.3 billion - more than double the figure of $534 million in 2019. Moreover, the year 2020 also saw the company become profitable for the first time with a net income of £322 million compared to a loss of $30 million in 2019.

Depicted: Admirals (Formerly Admiral Markets) MetaTrader 5 - BTCUSD Daily Chart. Date Range: 21 August 2019 - 7 April 2021. Date Captured: 7 April 2021. Past performance is not necessarily an indication of future performance.

The success of 2020 can be largely attributed to the surge in value of Bitcoin and other cryptocurrencies over the same time period, which saw many investors turn their attention to this market.

The growth of Coinbase stock is intertwined with the continued success of the cryptocurrency market. Given that the vast majority of Coinbase’s revenue is generated from transaction fees, the company, in its current format, is reliant on cryptocurrencies continuing to grow in popularity. Any slow down in the future demand for cryptocurrencies will greatly impact Coinbase’s success. 

The constantly evolving regulatory landscape of the crypto market could also cause problems further down the line.

On the other hand, if the popularity for crypto continues to grow, their early start and strong position in this market mean Coinbase is well positioned to benefit in the future. 

Bitcoin and other cryptocurrencies performed phenomenally in 2020. However, it is yet to be seen whether this success will continue throughout 2021 and what the future holds for cryptocurrencies in general.

When Is the Coinbase IPO?

On 1 April 2021, Coinbase announced that they anticipate their Class A common stock will begin trading on the NASDAQ on 14 April 2021. 

Coinbase had previously been targeting a listing date in March, but this was delayed after they were required to pay $6.5 million to settle regulatory claims that they had reported misleading information about their trading volumes.

After initially taking steps towards an Initial Public Offering (IPO), Coinbase Global decided to eschew the traditional IPO route and instead filed with the SEC for a direct listing.

Unlike an IPO, where investment banks - known as underwriters - sell a company’s shares to an exclusive pool of investors before they are listed on the stock exchange and raise money for the company in the process, a Direct Public Offering (DPO) essentially skips this step and lists existing shares directly on the exchange, without the issue of new shares or raising money for the company

By opting for a DPO, a company can save tens of millions of dollars in fees - which are usually around 7% of the total proceeds raised. By undertaking a DPO, Coinbase stock is following in the footsteps of other high profile technology stocks such as Slack, Spotify and, most recently, Roblox.

The Investors and Funds Behind Coinbase

Notable stakeholders who have purchased Coinbase stock on the private market include:

  • Andreessen Horowitz
  • Paradigm
  • Ribbit Capital
  • Tiger Global Private Investment Partners
  • Union Square Ventures

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s