Shares of Coinbase Global Inc., the largest U.S. cryptocurrency exchange, are set to start trading Wednesday under the ticker symbol COIN. The company, founded in 2012, provides a variety of financial services focused on bitcoin and about 50 other cryptocurrencies. It is the first major crypto company to go public and is doing so through a direct listing.
What is Coinbase's stock price?
Nasdaq set the reference price for a Coinbase share at $250. That price, however, is unlikely to bear much relation to the opening price, which is expected to be sharply higher.
What is Coinbase's valuation?
The $250 reference price gives Coinbase a valuation of about $65 billion -- a significant increase over the $8 billion at which Coinbase was last valued in a 2018 fundraising round. It also would make the company worth more than Nasdaq Inc., which has a market value of about $26 billion, and on par with Intercontinental Exchange Inc., parent of the New York Stock Exchange, at about $69 billion. Some analysts project the company's valuation will quickly top $100 billion once trading begins.
Is this Coinbase's IPO?
While this is Coinbase's stock-market debut, the company elected not to go the traditional route, but rather to go public in a direct listing. In a direct listing, companies save the money they would pay to investment banks in a traditional initial public offering, but they don't raise any money in the process. That is because the company's current investors sell their existing shares to the public rather than the company offering new shares.
Coinbase and some of the other big crypto companies have long eyed the public markets. What has changed over the past year has been a diminution of regulatory risk. Many world governments now are at least neutral, if not supportive, of cryptocurrencies. That removed a major risk for traditional investors and helped drive an eye-popping rally in the price of many cryptocurrencies. If Coinbase's debut is a success, expect others to follow.
How can you buy Coinbase stock?
Unlike a traditional IPO, the deal isn't being underwritten by an investment bank. Existing stockholders have the option to sell shares beginning Wednesday on the Nasdaq Global Select Market, and individual and institutional investors can buy them through a brokerage firm.
What are some risks in investing in Coinbase?
Coinbase's fortunes are closely intertwined with bitcoin, the digital currency launched more than a decade ago. Last year, 96% of Coinbase's net revenue came from transaction fees when its users bought or sold cryptocurrencies, which means the company benefited when bitcoin was in one of its frantic trading phases. In 2019, a down year for bitcoin, the company lost about $30 million.
In addition, competition in the rapidly evolving cryptocurrency industry could undermine Coinbase's stock price in the long run. It charges hefty fees compared with other crypto exchanges. A small investor looking to buy $100 of bitcoin at the prevailing market price would pay about $3.49 in fees on Coinbase, and potentially more with some payment methods such as debit cards. At Kraken, a rival exchange, the same investor would pay $1.50. At Bitstamp, another competitor, the cost would be 50 cents.
How have Coinbase, cryptocurrency and bitcoin fared during the pandemic?
Coinbase's profitability has exploded amid a rally in the price of bitcoin and other cryptocurrencies. Last week, the company said it expected its first-quarter earnings to be between $730 million and $800 million -- more than double what it earned in all of 2020 -- on revenue of $1.8 billion.
That growth has tracked the price of bitcoin, which has more than doubled in 2021, on Wednesday morning hitting a record of $64,754. Other cryptocurrencies, including ether and dogecoin -- the meme cryptocurrency created as a joke -- also reached highs Wednesday morning propelled by the listing.
(END) Dow Jones Newswires April 14, 202111:15 ET (15:15 GMT) Copyright (c) 2021 Dow Jones & Company, Inc.