Coinbase will become the first company specialized in cryptocurrencies to announce an initial public offering (IPO) on Wednesday, making stock market history. The company revealed that it would begin trading with a direct listing in Nasdaq on April 14 under the ticker ‘COIN’.
Bitcoin and Dogecoin recently faced a “crypto gold rush”. Is Coinbase about to see its own gold rush? Here’s what you need to know about Coinbase and what its IPO might mean for you.
What Makes Coinbase’s Initial Public Offering Stand Out?
An initial public offering (IPO) is, first and foremost a bet on a new company’s potential success. Coinbase has over 43 million users in over 100 nations, making it a large consumer base with the potential for steady development as interest in cryptocurrencies stays high.
The Coinbase story has a few unusual aspects, beginning with the fact that it is the first enterprise of its kind to go public. Other cryptocurrency trading platforms provide related services, but Coinbase stands out as the gateway to cryptocurrency for users all over the planet. As a result, it is well positioned to thrive as a publicly listed firm. The firm wants to make cryptocurrency-based financial services open to anyone with a smartphone, that’s a market of about 3.5 billion people.
Coinbase’s value is anticipated to boost due to its solid financials and rapid expansion, with 13,000 new users added in a single day. Coinbase may be valued at $100 billion, according to Bloomberg, thanks to the crypto trend. Experts claim that Coinbase is well poised to do well as a publicly listed firm, given the company’s good financial success in recent years and the increasing growth of cryptocurrencies in general. This can equate to a good stock market result.
However, there are several risks associated with Coinbase. Coinbase is heavily reliant on trading platforms. According to the Motley Fool, a private finance and investing advisory firm based in Virginia, transaction fees accounted for 86 percent of Coinbase’s revenue. This was in a year when cryptocurrencies drew a lot of attention, which could dwindle in the coming years. Also the central banks of countries around the world are issuing digital currencies, which could reduce interest in cryptocurrencies.
In the IPO, companies sell new shares to the public in order to raise capital. In a direct listing, a company simply makes its existing shares available to the public by listing them on a major exchange. Company insiders and other early investors can opt to sell (or not sell) their securities until the direct listing has been completed.
This is a rather rare way of bringing a company to public markets, but it’s not exactly unheard of, Spotify and Slack are two examples of major companies that have made direct listing in recent years.
Direct listings have become more popular as a concept in recent years as private companies became less dependent on IPOs as a fundraising mechanism. Some of Silicon Valley’s wealthy entrepreneurs have become frustrated by what they find to be routine underpricing of IPOs, pushing large firms to leave tens or hundreds of millions of dollars on the table.
About Coinbase Revenues & Controlling stake
Founded in 2012, Coinbase’s 2021 first-quarter earnings outperformed the whole year of 2020. According to the filing, the firm had sales of $1.8 billion in the year, with a net income of $730 million to $800 million.
Last year Coinbase had revenues of $1.3 billion with a profit of $322 million in fiscal 2020 , up from $533.7 million revenues recorded in fiscal year 2019. As per Yahoo Finance, Coinbase receives the bulk of its income from transactions with cryptocurrencies. Transactions accounted for 96 percent of sales in 2020. Subscription revenue amounted to $45 million in fiscal 2020, up 126 per cent year-over-year. Other sales amounted to $136.3 million in fiscal 2020, up 168 per cent year-over-year.
In terms of Executives Control Vote, Coinbase Co-Founder and CEO Brian Armstrong controls 21.7% of the voting power for Coinbase, Marc Andreessen has 14.3% of the voting power. In total Coinbase executives and directors control 54% of the voting power of the company.
*Disclaimer: Fyggex, does not give any guidance, advice or recommendations to neither invest or not in any available normal currency or digital currency directly or indirectly via any trading platform, exchange or provider. Our sole purpose is to make you aware of the related real or potential risks and opportunities so that you can make your own research prior to any financial decisions you may want to take. Past performance and position are not a guarantee of risk-free future returns.