Coinbase Investors Say It Could Hit $100 Billion Valuation When It Goes Public

Riding the wave of bitcoin’s 300% rise last year, cryptocurrency trading platform Coinbase is slated to become fintech’s next big initial public offering. It recently announced plans to pursue a direct listing—opting against a traditional IPO where investment banks serve as intermediaries and underwriters—and sell shares directly to the public. Now Coinbase investors are touting sky-high expectations for its market value. “I think it’s headed north of $100 billion,” says Olaf Carlson-Wee, CEO of crypto investment firm Polychain Capital who first invested in Coinbase in 2017. Before that, he was also Coinbase’s first employee.

“It’s the first legitimate IPO from the entire blockchain sector,” he says. He thinks Coinbase’s complex technology, regulatory licenses and loyal customer base are competitive advantages. 

In the last three months of 2020, Coinbase’s annualized revenue was $2.3 billion (nearly $600 million per quarter), according to a person familiar with its finances. Net profit margins are more than 20%, another person said. That profitability is on par with incumbent stock brokerages like Schwab and unusual for a young, fast-growing financial services company. Coinbase declined to comment for this article due to the regulatory “quiet period” it’s under leading up to its public market debut.

Valuations for newly public fintechs have risen to stratospheric levels. Buy now, pay later company Affirm trades at roughly 40 times its past-year revenue. That’s ten times higher than that of the average stock listed on the Nasdaq stock exchange. Online bill-payment service Bill.com trades at 48 times sales. New York renters’ and homeowners’ insurance company Lemonade goes for 84 times revenue. None are profitable. If Coinbase’s full-year 2020 revenue was between $1 and $2 billion and its market value was $100 billion, it would trade between 50 and 100 times past-year sales.

Another Coinbase investor thinks the San Francisco company could price its shares at an implied market value of $70 to $100 billion. Other recent reports have pegged Coinbase’s market value at $75 billion and $50 billion.

Coinbase should be sprinting to go public as soon as possible. On top of the generous valuations that public market investors are dishing out, there’s the crypto market cycle to consider. If bitcoin keeps rising this year, it would be much better for Coinbase to go public in the middle of a bull market rather than at the end. Otherwise, it would be setting itself up for a steep drop in revenue (and likely, stock price), potentially souring investors. The San Francisco company’s stock is expected to start trading publicly in the first or second quarter of this year. 

While Coinbase hasn’t had the large regulatory or technological stumbles of fellow fintech unicorn Robinhood, it has recently struggled with issues related to its corporate culture. Last September, billionaire Coinbase CEO Brian Armstrong drew criticism for saying Coinbase was a “mission-focused company” and that it wouldn’t engage on social issues that have flared up in America since the pandemic started, such as the Black Lives Matter protests. Armstrong then extended severance packages to employees who didn’t agree with the policy, and 60 people (5% of employees) decided to leave.