Coinbase IPO to Give the Crypto Market Increased Validation

Coinbase launched IPO (Initial Public offering) on April 14, 2021, becoming the first cryptocurrency company to take that step. The largest U.S.-based crypto exchange aims to build the crypto-economy — a more fair, efficient, accessible, and transparent financial system enabled by digital coins.

The company was founded in 2012 to enable anyone, anywhere, to easily and securely send or receive Bitcoin. It now has a trusted and easy-to-use platform.

Coinbase recently announced that it would offer more than 50 cryptocurrencies to trade, including Bitcoin and Ethereum. It went public on the Nasdaq later on Wednesday under the ticker symbol “COIN” as a direct listing. It means that the company isn’t raising new money, as it would do in a traditional IPO.

Coinbase is the Nasdaq’s first major direct listing, with Slack Technologies WORK, -1.16%, Spotify SPOT, -1.88%, and Palantir all opting to list at NYSE directly.

What about Valuations?

Nasdaq assigned Coinbase (COIN) a reference price of $250 a share on Tuesday evening, its total value surpassing $65 billion. However, Coinbase stock opened at $356 on Wednesday due to high demand, more than 40% above its reference price. It was trading at $375 at last. At one point, COINBASE GLOBAL INC (COIN) even reached $442.

Some traders are positive that a valuation will surpass $100 billion. That would make Coinbase bigger than several major U.S. exchange operators, including Nasdaq, ICE, CME Group CME, +0.44% or Cboe Global Markets CBOE, +0.86%.

However, others think that the crypto platform’s value is ridiculously high. David Trainer, CEO of the investment research firm New Constructs, noted that despite Coinbase’s revenue rally over the past 12 months, the company has little to no chance of meeting the future profit expectations of the ridiculously high valuation of $100 billion.

He also added that based on his calculation, the stock’s valuation should be closer to $18.9 billion. That is lower by 81% compared to the $100 billion expected valuations.

The reference price is based on input from the investment bankers and the past transactions of Coinbase shares on private exchanges. But it does not indicate where the stock will open.

How will Coinbase IPO impact the crypto market?

According to analysts, the Coinbase IPO will give the crypto market increased validation. Wedbush analyst Dan Ives stated that the Coinbase IPO is most likely a watershed event for the crypto industry. It will be something the Street will focus on to gauge investor appetite. He also added that Coinbase is a barometer for the growing mainstream adoption of crypto for the coming years, calling the company a foundational piece of the rapidly growing crypto ecosystem.

However, Coinbase decided not to do a traditional IPO. Instead, it went public through a direct listing. It means that Coinbase stock’s current owners will have to convert their shares to make them available for trading. They can avoid large fees from investment bankers in that way.

Coinbase offered 261.3 million shares outstanding when it went public on Wednesday 04/14/2021, giving it a market capitalization of almost $68 billion. Coinbase has shown with the SEC in its listing documents that shares in COIN traded at an average of $343.58 during private transactions between January and March of 2021.