Coinbase Stock: When Can You Cash In on This Cryptocurrency IPO?
The price of the cryptocurrency Bitcoin has skyrocketed 700% over the past year, making one single Bitcoin worth more than $58,000 (as of April 9).
Part of Bitcoin’s rising value can be attributed to more widespread acceptance of cryptocurrencies by fintech companies like Square and PayPal, investing firms like BlackRock, and financial institutions.
Understandably, some investors are looking for a way to capitalize on Bitcoin’s rise without investing directly in the cryptocurrency itself. Enter Coinbase.
The company is a cryptocurrency exchange that allows users to easily buy and sell digital currency of all kinds — including Bitcoin, Ethereum, Litecoin, and other digital assets — through its platform. When a cryptocurrency changes hands on Coinbase, it’s logged in through a secure list of transactions, called a blockchain.
With Bitcoin (BTC) and other cryptocurrencies gaining more mainstream acceptance, investors are eager to get their hands on shares of Coinbase stock when the company goes public.
What is Coinbase?
Coinbase is a cryptocurrency exchange that has become wildly popular for its ease of use and security features.
Expected IPO Date:
Late March 2021
- Coinbase intends to go public via a direct listing on April 14, 2021.
- The company recorded $1.8 billion in sales in the first-quarter of 2021.
- Coinbase is the rare high-growth unicorn that’s also profitable. The company booked estimated net income of $730 million to $800 million in Q1 2021.
- There are now 56 million users on Coinbase’s platform. For perspective, Robinhood’s last reported user number was 13 million.
- Coinbase’s revenues were up significantly over the past year, but in a protracted sell-off of Bitcoin its sales could stay depressed for years.
- Like most IPOs, Coinbase is expected to have a rich multiple when it goes public.
10 Top Numbers from Coinbase’s S-1 Filing
- $1.28 billion: Coinbase revenue in 2020, up 139% from 2019.
- $322 million: This is how much net income Coinbase had in 2020, up from a loss of $30 million 2019.
- 43 million: The number of Coinbase users in 2020.
- 2.8 million: Monthly transacting users on Coinbase’s exchange.
- 11.1%: The percentage of the crypto market, in assets, that Coinbase held in 2020. This is up from 8.3% in 2019 and 4.5% in 2018.
- 70%: The percentage of cryptocurrency assets on the company’s platform that is in Bitcoin.
- $868.5 million: Coinbase’s operating expenses in 2020.
- $456 billion: How much Coinbase customers have traded on the company’s platform over the lifetime of the company.
- $90 billion: The amount of the company’s “assets on platform,” which is the value of the currencies held on Coinbase’s platform.
Bull Case: Why Investors Should Consider Buying Coinbase Stock
It seems that cryptocurrencies are reaching an inflection point for their acceptance, and if enough investors consider them to be a safe alternative to stocks and bonds, then cryptocurrencies could end up becoming another store of value like gold.
Investors are hoping that if they buy Coinbase stock now, they may be getting in early on the widespread acceptance of cryptocurrencies.
As the largest cryptocurrency exchange in the U.S., Coinbase gives buyers and sellers access to the vast crypto market. While this market fluctuates with the price of digital currencies, consider that Bitcoin’s market value alone is currently worth $1 trillion.
Aside from the fast-growing crypto market, Coinbase itself is also rapidly growing. The company ended the first quarter of 2021 with 6.1 million monthly transacting users. And the amount of assets trading on Coinbase’s platform is now $223 billion, representing 11.3% crypto asset market share. Coinbase’s top and bottom lines are also moving in the right direction. The company’s revenue jumped to $1.8 billion in Q1, up from just $191 million in the year-ago quarter and earnings came in at approximately $730 million to $800 million, up from $32 million in Q1 2020.
Finally, it seems that cryptocurrencies are becoming more mainstream. PayPal and Square allow users to buy and sell some digital assets (or are working towards it right now), Tesla just bought $1.5 billion worth of Bitcoin, and one of the largest investment firms, BlackRock, has “started to dabble” in Bitcoin.
In short, many fintech companies, tech companies, and investment firms are no longer writing off cryptocurrencies — and that’s great news for Coinbase.
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Bear Case: Why You Should Avoid Coinbase Stock
One of the main reasons investors may be bearish on Coinbase is that crypto assets are still very volatile and their longevity as a viable investing avenue is still unproven.
For example, while BTC’s value has surged recently, it could easily crash at any moment just like it did several years ago. In 2017 the price of Bitcoin reached $20,000 — unfathomable at the time — and then subsequently crashed to just $4,000 by the end of 2018.
If that were to happen to Bitcoin again, or if the value of Bitcoin and other crypto-assets don’t continue rising fast enough, it could hurt the demand for Coinbase’s services, and likely negatively affect the company’s share price after it goes public.
Coinbase highlighted this problem in the company’s S-1 filing, a document that companies file with the U.S. Securities and Exchange Commission (SEC) before they go public. In it, Coinbase said that one of its risk factors is “our dependence on offerings that are dependent on crypto asset trading activity, including trading volume and the prevailing trading prices for crypto assets, whose trading prices and volume can be highly volatile.”
Additionally, it’s possible that the U.S. government could regulate crypto exchanges like Coinbase in the near future. The government could potentially require exchanges to act more like banks, which could hurt how quickly Coinbase could innovate and adapt to the young crypto market.
On the flip side of this argument is that if cryptocurrencies become so popular and safe that it convinces traditional banks to open their own exchanges, then Coinbase’s unique position in the crypto market could be lost.
Coinbase Stock: 7 First Quarter 2021 Numbers to Know
Coinbase recently released its estimated first-quarter 2021 results. Here are some of the highlights that potential Coinbase investors should know:
- 56 million: The number of verified Coinbase users
- 6.1 million: The amount of monthly transacting users (MTUs)
- $1.8 billion: Coinbase’s total revenue in the quarter
- $730 to $800 million: Net income for the quarter. When Coinbase’s quarterly financials are reviewed by its independent registered public accounting firm, it will report an exact figure
- $223 billion: The amount of “assets on platform” the company has. This figure represents 11.3% of crypto asset market share
- $335 billion: The trading volume on Coinbase’s platform in the quarter
$1.1 billion: Coinbase’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA)
When Can I Buy Coinbase Stock?
Coinbase has filed its S-1 to go public through a direct listing and will go public on April 14. Direct listings are becoming a popular way for some companies to go public because they are usually less expensive than traditional initial public offerings (IPOs) because the company doesn’t have to pay expensive fees to an investment bank to take it public.
Coinbase said that it will list 115 million shares of Class A common stock. The company won’t issue any new shares but will instead allow existing shareholders to sell their stock to new investors.
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What is Coinbase’s Stock Symbol?
Coinbase will go public on April 14, and will list its shares on the Nasdaq exchange with the ticker symbol COIN.
The company will go public through a direct listing, which will be the first major direct listing on the Nasdaq exchange.
Coinbase Stock: Who Owns It Now?
Coinbase has had about 57 investors and 11 funding rounds since it was started by co-founder Brian Armstrong in 2012. The company has since raised a total of $547 million.
Coinbase listed some of its biggest investors in its S-1 filing, including Andreessen Horowitz, Paradigm, Ribbit Capital, Tiger Global Private Investment Partners XI, L.P, and Union Square Ventures.
Andreessen Horowitz’s venture capital firm holds the largest percentage of Class A stock — which has one vote per share — with 24.6%, Tiger Global has 11.7%, and Paradigm holds 11.4%.
INSANE RETURNS: Incredibly, Andreesen Horowitz could see its Coinbase stake quickly rise to more than $25 billion after the Coinbase IPO!.
Coinbase Stock Chart: How Much is It Worth Now?
Coinbase’s valuation has experienced a meteoric rise over the past two years. In 2018, the crypto exchange was valued at $8 billion, which was an impressive valuation at the time.
But the company’s valuation has ballooned to $90 billion since then. Here’s what Coinbase’s valuation progression looks like over the past two years:
Why the dramatic increase? The change came back in January when Coinbase started a secondary share sale on Nasdaq Private Markets. According to Axios, the company began selling shares every week to private investors, starting at the end of January, and the share price continued rising as it did.
The first batch of 75,000 shares sold on Jan. 29 at $200 per share, valuing the company at about $54 billion. Over the next two weeks, shares sold for $301 and $303. An additional batch of 127,000 shares sold for $373 per share, equal to a violation of about $100.2 billion.
Most recently, Bloomberg reported that a batch of shares sold for $350 in the first week of March, which put Coinbase at a pre-IPO valuation of $90 billion. Since that’s the last time shares will be sold on the private market, this is the latest valuation for the company before it goes public.
What Is Coinbase’s Share Price?
Coinbase isn’t publicly traded yet, so it doesn’t have a share price. Investors should also know that just because Coinbase’s shares traded for about $350 per share on the private market, it doesn’t mean that that’s what they’ll be priced at when the company has its direct listing later this month.
Should You Buy Coinbase Stock When the Company Goes Public?
There is a lot of interest in everything cryptocurrency-related right now, thanks to Bitcoin’s rising value. And Coinbase could clearly benefit as Bitcoin, and other digital currencies, become more mainstream.
The problem, at least right now, is that investors should know that investing in Coinbase is a pretty big bet on an unknown market.
For one, cryptocurrencies have yet to become another store of value like gold, although some people believe they will be. If interest among retail investors for cryptocurrencies begins to fade away, Coinbase’s business could fizzle out.
That seems unlikely right now, but investors only need to look back two years to when Bitcoin’s value plummeted. If that happens again when Coinbase is a publicly-traded company, you can bet that its share price will take a major hit.
Additionally, if Bitcoin and other cryptocurrencies are here to stay, it doesn’t mean that Coinbase is the best way to invest in their rising popularity. Buying Bitcoin, Ethereum, or other digital assets comes with some risk, but it could also be a much more lucrative way to benefit from cryptocurrency than buying shares of a crypto exchange.
Investors should also know that even though Coinbase is the largest crypto exchange in the U.S., it doesn’t currently have a sustainable competitive advantage. This means users could easily shift their buying and selling from Coinbase’s exchange to another competitor.
Even now, Square (NYSE: SQ) and PayPal (Nasdaq: PYPL), and soon other payment apps are moving further into the cryptocurrency space and allowing users to buy and sell Bitcoin.
And finally, it’s usually wise to wait at least a few quarters after a company goes public before you invest in it. Investors will know a lot more about how Coinbase is doing financially after it reports several quarters, and investors may be able to avoid any share price volatility that typically occurs after a company goes public.
Frequently Asked Questions
What is Coinbase’s stock symbol?
Once Coinbase completes its direct listing it will use the ticker symbol COIN and will be traded on the Nasdaq exchange. The company will go public on April 14 on the Nasdaq exchange.
Is Coinbase publicly traded?
Coinbase has already filed an S-1 with the SEC and will go public through a direct listing, rather than through an IPO, on April 14.
Who owns Coinbase?
The company is primarily owned by venture capital firms and the company’s upper management. Once the company goes public, retail investors will be able to buy shares of Coinbase on the public market.