Coinbase Global Inc. became the most valuable US exchange on Wednesday amid strong demand for the cryptocurrency platform’s new public stock.
Start trading at $ 381 per share at 1:25 pm Eastern time on Wednesday, after The reference price of $ 250 was set on Tuesday afternoonand propelled to as high as $ 429.54 before ending the first trading day at $ 328.28. Coinbase held a direct listing instead of a standard public offering, meaning the company did not raise money through the public offering and did not have a traditional IPO price to measure the level of the IPO. increase in the first day of the stock.
At the closing price, Coinbase is valued at $ 85.8 billion on a dilution basis. CME Group Inc.
The next most valuable US exchange, has a market cap of around $ 74 billion.
Coinbase’s direct listing comes at the “perfect” timing for the platform due to explosive demand for cryptocurrency trading and record high bitcoin prices.
Reena Aggarwal, professor of finance at Georgetown University’s McDonough School of Business. She hopes the company will draw wide interest including from exchange-traded funds wanting to get into contact with the world of cryptocurrencies but not being able to actually own bitcoin.
The company predicts that it will report first-quarter revenue of about $ 1.8 billion, 800% higher than what it saw in the previous quarter. Coinbase is also expected to log net income of between $ 730 million and $ 800 million, compared with the $ 32 million it reported a year earlier. The company has 56 million verified users.
While the company is clearly benefiting from the increased interest in cryptocurrencies, experts predict that Coinbase’s stock will be more volatile due to its relationship to cryptocurrency trading. E-assets and prices of popular crypto assets.
“Cautiously, we are assuming that the value of the cryptocurrency will continue to cycle, so we assume Coinbase’s 2022 revenue will be> 35%. lower more than 2021, ”wrote analyst MoffettNathanson in a client note Tuesday. She argued that “it is very likely that we are nearing the top right now,” with expected revenue in the first quarter of Coinbase being 40% higher than what the company posted for the entire year. 2020.
However, Ellis has chosen to rate the stock as a buy with a $ 600 target price, calling the stock an “extremely rare asset” recognized as “not for the faint of heart” but for for investors who have “many years” to invest.
Coinbase generates the majority of revenue from trading in crypto wallets and another question concerns the sustainability of the company’s fee structure. According to Bernstein analyst Harshita Rawat, the company’s fees are “one step higher” than what US stock exchanges and brokers can charge.
“Currently, companies like Coinbase (and smaller companies like Gemini) may charge higher fees (compared to others) for newer / less advanced user-oriented products for cryptocurrencies – because they differentiate themselves at ease of use for users, ”writes Rawat, while predicting that it may ultimately be difficult for the company to maintain current fees in the context of a competitive market. electronic money transactions.
Aggarwal echoed some of these concerns as she expected the company to face competition from “both crypto exchanges and traditional exchanges,” even though she thinks Coinbase. “Will continue to have a competitive advantage” because there is room for collisions that dramatically reduce fees.
She also highlighted a smaller part of Coinbase’s business – its role as custodian of holding crypto assets for companies – as an attractive part of corporate strategy and a the part that distinguishes Coinbase from traditional exchanges usually doesn’t serve this function.
“While the trading side can be volatile, the custodial aspect will be stable,” said Aggarwal, noting that the custodian business binds firms to Coinbase for potential trading activity in future. Many companies can feel comfortable using the service once Coinbase is public, she added.