Coinbase: Stocks And Crypto Investment Opportunities

Coinbase is a cryptocurrency exchange platform that allows investors to buy, sell, and trade various digital currencies such as Bitcoin. Based in San Francisco, the company was founded in 2012 and has since become the default bitcoin bank for millions of users. Coinbase's IPO in 2021 was a significant event as it was the first time a major crypto company was offered to the public as a traditional stock on Nasdaq. This event marked a historic merging of the stock market and the block market. As a result, ordinary investors could now buy Coinbase stock (COIN) and invest in the company's growth. Coinbase's IPO and its performance as a publicly traded company have generated interest from investors who want to know more about investing in stocks on Coinbase.

Coinbase's IPO

Coinbase has chosen to go public via a direct listing, a relatively new option for companies wishing to go public and one that is particularly suited to a crypto company. In a direct listing, there is no pre-set price decided by investment bankers—the market on the initial trading day influences the starting price. This is in contrast to an IPO, where investment bankers set the share price as high as they think the market will bear, usually receiving a percentage of the total amount raised as payment. Direct listings do not have traditional lockup periods that prevent insiders from selling shares in the first six months after the listing, and they do not raise new capital in the same way that IPOs do.

Coinbase's listing on the Nasdaq stock exchange gives traditional investors, who may be interested in digital currencies but are unable or unwilling to buy them directly, an indirect way to buy into the cryptocurrency market. Coinbase is the largest company to go public via direct listing, and its shares started trading under the ticker symbol COIN.

There are a few ways to invest in Coinbase stock. The easiest way is to simply buy COIN stock using an online broker like E*TRADE or an app like Robinhood. Another option is to buy the COIN/BUSD trading pair on Binance, which can be thought of as a token backed by actual Coinbase shares.

Coinbase's direct listing

Coinbase, a leading cryptocurrency exchange, made its public debut on April 14, 2021, on the Nasdaq stock exchange. Unlike most companies, Coinbase chose to go public through a direct listing instead of the traditional Initial Public Offering (IPO) process.

A direct listing is a process in which a company does not issue any new shares or raise any new capital. Instead, it lists its existing privately held stock on a public exchange. In the case of Coinbase, this meant that its insiders or shareholders sold stock directly to the public through the exchange, rather than the company selling new shares and raising capital. This approach has been gaining popularity among high-profile companies, with Spotify, Slack, Palantir, and Roblox also opting for direct listings.

Coinbase's decision to pursue a direct listing offered several benefits. It was more economical, as the company avoided investment banking fees, and it levelled the playing field for investors by giving everyone the same opportunity to buy shares at the market-based price. Coinbase's stock closed its first day of trading at $328.28 per share, giving the company an initial market cap of $85.8 billion.

While direct listings offer advantages, they also pose some unusual risks for investors. One key risk is the potential for a thin or non-existent market, as the number of shares floated depends on whether insiders want to sell. Additionally, direct listings bypass the support of investment banks, which typically market the stock to institutional investors and help set an IPO price to create a "fair value" range. Without this support, the stock price can be subject to significant fluctuations, especially with high demand and relatively few shares traded.

Coinbase's valuation

Coinbase, the largest US-based cryptocurrency exchange, went public in 2021 via a direct listing on the Nasdaq stock exchange. This was a significant event as it was the first time a major crypto company was offered to the public as a traditional stock on Nasdaq, marking the first real merging of the stock market and the block market.

Before its public debut, Coinbase was valued at $8 billion in 2018 after closing a $300 million round of private funding. Reports indicated that shares of Coinbase were selling on the private market at a valuation of about $50 billion, and there was speculation that the company could attain a valuation of as much as $75 billion in the private market.

Coinbase's direct listing saw the company sell around 114.85 million shares, with a volume-weighted average of $343.58 per share, putting the company's valuation at $39.46 billion and giving it a market capitalisation of around $100 billion.

Gil Luria, the director of research at D A Davidson, projected that the company would generate $2 billion in revenue in 2021 and set a price target of $195 per share. Coinbase's revenue doubled in 2020 to $1.28 billion, and the company turned a net profit of $322.3 million. Coinbase's growth strategy focuses on adding more customers and expanding its asset offering, as well as continuing to form partnerships and develop its technology.

Coinbase's public debut came at a time when cryptocurrencies were trading at record highs, with Bitcoin reaching $60,000 and Ethereum exceeding $2,000, making the stock attractive to investors. However, potential investors should be mindful of the volatile nature of the cryptocurrency markets and the competitive landscape, which could impact the value of Coinbase shares.

Coinbase's competitors

Coinbase is one of the largest crypto exchanges, with 43 million users in over 100 countries. It has built a reputation as the safest platform for converting dollars into tokens, and its customer base includes retail and corporate clients like Tesla and hedge fund Third Point Management. However, it faces competition from several other exchanges, including:

• Binance: The largest crypto exchange by far, Binance was launched in China four years ago and has since grown explosively, offering more than 350 coins and generating spot trading volume. It is widely seen as the most innovative exchange, having unveiled one of the industry's first crypto derivatives platforms for sophisticated traders.
• Huobi Global: Also founded in China, Huobi offers investors almost as many coins as Binance (325 compared to 358) but attracts less traffic, posting trading volumes of about $210 billion in March 2021 versus $757 billion for Binance.
• Gemini: A New York-based exchange founded by the Winklevoss twins.
• Bitstamp: A London-based exchange.
• Kraken: A San Francisco-based exchange.
• Crypto.com: Offers a wide range of crypto services but charges high fees.
• FTX: A crypto exchange that has offered tokenized shares in Coinbase.

Coinbase's growth strategy

Coinbase has been adding users organically or through word-of-mouth, which gives it scope to attract more users through proactive marketing channels. The company also plans to continue forming partnerships to create more opportunities for customers to engage in cryptocurrency-based financial transactions, and to develop its technology to enable ecosystem partners to better connect with customers and process transactions.

Coinbase's revenue doubled in 2020 to $1.28 billion from $533.7 million in 2019, according to its prospectus filed with the Securities and Exchange Commission (SEC). It also turned a net profit of $322.3 million, having made a loss of $30.4 million in 2019. As of December 31, 2020, Coinbase’s users had traded over $456 billion since its launch and stored over $90 billion in assets, generating over $3.4 billion in revenue.

Coinbase's median quarterly trading volume increased from $17 billion in 2018 to $21 billion in 2019 and $38 billion in 2020. The platform generates more than 96% of its net revenue from transaction fees from volume-based trades by retail customers and institutions. The company's growth strategy is focused on increasing trading volume and attracting more institutional investors. Coinbase offers a range of products and services to its customers, including custody solutions, trading technology, and a robust security infrastructure.

Coinbase's direct listing on the Nasdaq stock exchange in April 2021 was a significant milestone, making it the first major crypto company to be offered to the public as a traditional stock. The company sold around 114.85 million shares, with its Class B shares, which hold higher voting rights, converted to Class A shares. Coinbase's share price has been highly popular with investors due to the recent surge in the price of Bitcoin and other digital assets.

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