FTX Derivatives Exchange Launches Coinbase Pre-IPO Contracts

Following the news that Coinbase Global Inc has submitted its draft registration to the United States Securities and Exchange Commission (SEC) for a potential Initial Public Offering (IPO), FTX Derivatives Exchange has leaped a step further by listing Coinbase (CBSE) Pre-IPO Contracts. This listing was made known by FTX Derivatives exchange’s Chief Executive Officer, Sam Bankman-Fried.

While Coinbase in the announcement released for the IPO filing gave no details of the registration, Coingape reported earlier that market analysts including Messari researcher Mira Christanto, believes that the company can seek a valuation anywhere close to $28 billion, the potential of which FTX derivatives exchange seeks to leverage with its latest product.

The Coinbase (CBSE) products are contracts that will be settled through the exchange of cryptocurrency assets and according to the Key Information document published by FTX derivatives exchange, the Coinbase pre-IPO contracts “represent futures contracts whose value is linked to the market capitalization of a specific stock – in this case Coinbase Inc. – at the end of its first trading day at the stock exchange.”

FTX noted that the pre-IPO contracts tracked Coinbase’s market capitalization divided by 25m, with the contract balances set to be converted into the equivalent amount of Coinbase Fractional Stock tokens at the end of Coinbase’s first public trading day. FTX added in the Key Information document that should Coinbase fail to go public by June 1, 2022, the pre-IPO contract balances will cash expire to reflect the widely publicized US$8 Billion market capitalization.

Other Key Highlights of the Coinbase Pre-IPO Contracts

The Coinbase pre-IPO product will be operated by FTX Derivatives Exchange and CM-E, a Munich based financial service firm with the latter providing the purchase and sales prices of the contracts. 

The Coinbase CBSE contracts are not available to United States residents in line with the regulation compliance policies of FTX exchange and the exchange advises potential customers to beware of the potential losses that may be associated with investing without having a deep knowledge of the product.

Coinbase Global Inc noted that the Form S-1 it filled is “expected to become effective after the SEC completes its review process, subject to market and other conditions.” Users should therefore not confuse the FTX pre-IPO contracts with investment in the potential Coinbase stocks.