Crypto exchange Coinbase is set to go public later on 14 April in a direct listing of its shares in New York.
Nasdaq has set a reference price for Coinbase shares at $250, which would imply a valuation of $65bn for the business.
However, the reference price is not what the shares will likely open at, but rather a benchmark for the company’s performance. Instead, the opening price will be determined by buy and sell orders collected by Nasdaq.
By choosing a direct listing under the ticker symbol COIN, the cryptocurrency exchange will allow existing shareholders to start selling shares immediately at a price driven by the market. This is a route chosen instead of a traditional initial public offering, where a company raises cash by selling new shares.
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In recent major direct listings for the likes of Spotify and Slack, shares traded 13% and 48% higher respectively by the end of their first day of trading.
The reference price is below the roughly $343 per share average price of Coinbase shares in private trading during the first quarter of 2021, and some investors expect Coinbase’s market capitalisation could top $100bn before the day is out.
Bitcoin rose to record highs on 13 April ahead of the debut, and continued that rally on 14 April to jump more than 6% to a fresh high of $64,800 at 7:10am BST.
Brian Armstrong, Coinbase’s chief executive, said in a 14 April blog post that the listing “is a milestone, but it’s not as important as every new day in front of us… We’re still in the early days of this industry.”
Ahead of Coinbase’s debut on Wall Street, here’s what sector and investing experts have to say about the listing. These statements have been edited and condensed for clarity.
Michael Hewson, chief market analyst at CMC Markets
With bitcoin already having more than doubled in the last six months and cryptocurrencies becoming more popular with investors, it can certainly be argued that crypto has become more mainstream in the last 12 months.
Tesla CEO Elon Musk has bought bitcoin and allowed customers to pay for Tesla cars with bitcoin, and the likes of Morgan Stanley now offer access to crypto markets to its wealthier clients.
Will the Coinbase IPO prove popular with retail investors? There’s little doubt that demand and interest is set to be high. The bigger question is whether any valuation is sustainable, particularly given how many governments aren’t particularly enamoured by cryptocurrencies, which means future regulation is likely to be a clear and present danger, and a probable headwind.
Asen Kostadinov, strategy manager at crypto custody startup Copper
The Coinbase IPO could well serve as a gateway drug to crypto. Arguably, this is the most important IPO in crypto to date. Coinbase is a credible, regulated, profitable blue-chip tech stock, which is also a pure-play crypto company. As such, it will be a likely holding for every tech investor/ETF fund and it will also be the best crypto market proxy investors have had.
Institutional adoption of crypto has clearly gone through a major inflection point since the last quarter of 2020 which speaks to the maturity and credibility of the space. The growth the sector has experienced over the past year is a lot more sustainable than in 2017.
The indicators are that this bull market has further to go and we are not at the top yet with such strong liquidity, transactions at a record high and institutions buying so much.
Nigel Green, CEO of financial advisory firm deVere Group
Coinbase’s direct listing is a truly momentous day for the cryptoverse. Should it hit its private market valuation of $100bn, it would immediately become one of the 85 most valuable companies in the US.
Critically, as the direct listing on the Nasdaq will reach a wider investment base other than the usual crypto evangelists, investors must expect much greater government scrutiny. Governments, central banks and regulators will be keen to protect the currency status quo. We should expect considerably higher levels of regulation in the crypto market. Indeed, I believe it is inevitable.
Major draconian clampdowns are unlikely as digital currencies are increasingly regarded as the future of money – even by traditionalists. They can’t put the genie back in the bottle.
The Coinbase IPO underscores that cryptocurrencies in some form or another are here to stay – and the market is only set to grow. Because of this, investors should know that regulation will become a greater priority.
Jonathan Rowland, executive chairman of London-listed digital asset manager Mode
A $100bn valuation is mammoth and almost four times the market capitalization of Nasdaq. Of course that could jump on the first day of trading if recent US IPOs are anything to go by, even though Coinbase has opted for a direct listing rather than an IPO-proper.
It’ll be interesting to see what take-up there is from institutional investors, including those who have previously bad-mouthed cryptocurrencies. Still, we’re not surprised by the huge valuation or the huge interest: recent surveys suggest that some 30 million Americans have bought Bitcoin at some stage.
Certainly, we’re seeing strong investor interest here in the UK too: last June the FCA estimated that 2.6 million Brits have bought crypto, more than double the previous year and I expect that number will have increased significantly during the pandemic.
Matt Weller, global head of market research at City Index
In the US, Coinbase is synonymous with cryptocurrency trading, and with major cryptoassets like bitcoin and ethereum surpassing their all-time highs following massive surges so far in 2021, there’s never been a better time for the firm to IPO.
Looking ahead, the most immediate risk for the company’s shares will be the ever-volatile price of Bitcoin and Ethereum. In other words, the Coinbase IPO represents a way for stock investors to get exposure to the ongoing bull market in cryptoassets, for better or worse.
The other major narrative to watch with Coinbase in the coming months will be institutional adoption. As management noted, “meaningful growth in 2021 driven by transaction and custody revenue given the increased institutional interest in the crypto asset class” is expected. If (and it’s a big if) large institutions continue to accumulate cryptoassets in the coming quarters, Coinbase should be a major beneficiary.
One way or another, the Coinbase IPO will be a key measure of investor appetite in cryptoassets and IPOs generally.
To contact the author of this story with feedback or news, email Emily Nicolle
