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January 25th, 2023
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Coinbase is the talk of Wall Street on Wednesday: ‘Watershed moment’ in crypto
MarketWatch | Mark DeCambre | Apr 14, 2021
Coinbase is the talk of Wall Street on Wednesday, as the largest crypto platform in the U.S. gears up for its public debut on a traditional exchange, arriving via a direct listing rather than a more traditional initial public offering.
The arrival on the public markets of Coinbase COIN, 34.38% is a big moment in the world of cryptocurrencies. The company was created just over a decade ago with the genesis of bitcoin BTCUSD, -2.43% and today stands at what many in the industry have described as a tipping point.
There are few ways to secure direct ownership of crypto currencies, outside of buying them directly, a service that Coinbase provides for a fee, and which investors appear willing to pay for.
Coinbase, whose users primarily deal in bitcoin and ethereum, reported last week that its revenue soared 847% in the first quarter to $1.8 billion, and that it now has 56 million verified users.
See: ETF investors say Coinbase listing will cause explosion in crypto investing
Leeor Shimron, an analyst at FundStrat Global Advisors, described the Coinbase listing as seminal. “Coinbase’s direct listing is a watershed moment for the crypto industry.”
Wedbush analyst Dan Ives said the listing is a reflection of cryptocurrencies’ having arrived at the mainstream. “Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of bitcoin and crypto for the coming years in our opinion,” he wrote in a research note Tuesday.
Some caution that the implied valuation for Coinbase as a crypto exchange has gotten too lofty, compared with traditional stock exchanges like Nasdaq Inc. NDAQ, -0.35%, where Coinbase will directly list, and Intercontinental Exchange ICE, -0.35%, the parent company of the New York Stock Exchange.
In a direct listing, a company floats its shares on a stock exchange but without hiring banks to underwrite the transaction as in an IPO.
David Trainer, CEO of the investment research firm New Constructs, said the crypto platform’s value is ridiculously high. “Even though Coinbase’s revenue surged over the past 12 months, the company has little to no chance of meeting the future profit expectations that are baked into its ridiculously high expected valuation of $100 billion,” he said.
“Coinbase’s expected valuation of $100 billion implies that its revenue will be 1.5 [times] the combined 2020 revenues of two of the most established exchanges in the marketplace,” namely, NYSE parent ICE and Nasdaq.
Trainer said that, based on his calculation, Coinbase’s valuation should be closer to $18.9 billion — an 81% decrease from the $100 billion expected valuation.
See: The Under-Appreciated Significance of Coinbase Going Public
‘Not for the faint of heart’
MoffettNathanson analyst Lisa Ellis explained to MarketWatch why the offering is, as she described it, “not for the faint of heart,” even as she initiated coverage of the exchange at a buy with a price target of $600, before the stock has seen its first trade on the Nasdaq.
“I’m super super bullish on Coinbase … because you get the sense that they are a market leader in the space and crypto-agnostic,” she said.
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