Dive Brief:
- Cryptocurrency exchange Coinbase filed an S-1 form with the Securities and Exchange Commission (SEC) last Thursday, signaling its plan to go public.
- The filing indicates the company plans to proceed through a direct listing rather than a traditional initial public offering (IPO). The company has $90 billion in assets on its platform and $456 billion in lifetime trading volume.
- The move points to the growing mainstream acceptance of virtual currency as a store of value.
Dive Insight:
Under a direct listing, companies can raise capital publicly without having to secure the commitment of an underwriter. Spotify and Slack, who went public in 2018 and 2019, respectively, are two recent high-profile tech companies to bypass the traditional IPO process.
Direct listings can lead to larger potential gains for investors, since the initial share price is set by market trades rather than through negotiations with the underwriter.
The offering gives people who have missed out on the cryptocurrency boom a chance to indirectly benefit from its growth; to the extent Bitcoin and other cryptocurrencies do well, Coinbase is likely to do well, too.
The company is valued at around $77 billion based on recent trades of its shares on the Nasdaq private market. The company was trading last week at $303 a share.
A the end of last year it had $1.062 billion in cash, uo from $549 million in 2019, and $1.277 billion in operating revenue against $869 million in total operating expenses. It claimed $527 million in adjusted earnings before interest, taxes, depreciation and amortization, up from $24 million in 2019, an increase or more than 2,000%. The main reason for the large shift is the company’s swing to profit in 2020 after sustaining a loss in 2019.
“It’s like the person selling picks and shovels to the miners,” Randy Carver of Carver Financial Services said. “You don’t have to be a prospector to make money.”
Bitcoin, the original cryptocurrency, whose value surged more than 300% last year, is hovering around $48,000 after hitting a high of $58,000 in mid-February.
2020 profit
Coinbase, launched in 2012, initially raised about $500 million from Y-Combinator and Greylock Partners, among other big-name partners. Later investors include Andreessen Horowitz, Tiger Global and Union Square Ventures.
The company will be profitable when it goes public, a rare feat. Last year, it swung from a loss to a profit of $322 million, on net revenue that more than doubled to $1.14 billion, according to its S-1 filing.
To sustain its profitability, the company will need to grow its base of traders. The more people trade on its platform, the more money it makes; the lion’s share of its revenue comes from transaction fees. Last year, its user base rose 34% to 43 million, while monthly transactions rose 180% to 2.8 million, according to the S-1 filing.
Bitcoin and Ethereum were the two most commonly traded currencies.
Going public is the next step of the company’s goal to avail cryptocurrency to as many people as possible, Coinbase CEO Brian Armstrong said in the S-1 filing. “Coinbase is building the infrastructure to power the cryptoeconomy,” he said. “helping bring the benefits of this new technology to the world.”
The company, which will trade under the stock ticker “COIN,” hasn’t announced an offering date, but analysts think it could be within the next month or two. If that happens, it would be the first major direct listing to take place on Nasdaq, a Bloomberg report says.
Goldman Sachs, JPMorgan Chase, Allen & Co., and Citigroup are the company’s transaction advisors.
