Coinbase Global Inc. became on Wednesday the most valuable exchange in the United States amid strong demand for public shares of the cryptocurrency platform.
Coinbase COIN Shares,
began trading at $ 381 per share on Wednesday at 1:25 p.m., after a reference price of $ 250 was set on Tuesday afternoon and rose to $ 429.54 before the end of the its first day of trading at $ 328.28. Coinbase maintained a direct listing instead of a standard initial public offering, meaning the company did not raise money through the stock exchange process and did not have a traditional IPO to compare the concentration of the former day of actions.
At the closing price, Coinbase was valued at $ 85.8 billion diluted. CME Group Inc. CME,
the next most valuable stock exchange in the United States, has a market capitalization of about $ 74 billion.
Coinbase IPO: Everything You Need to Know About “Crypt Dividing Time” in Crypto
Coinbase’s direct listing arrives at the “perfect” time for the platform given the growing demand for cryptocurrency and the highest Bitcoin BTCUSD prices
Said Reena Aggarwal, a professor of finance at McDonough School of Business at Georgetown University. He hopes the company will attract a lot of interest, including exchange-traded funds that want to expose themselves to the world of cryptocurrencies, but that can’t actually own bitcoins.
The company expects to report first-quarter revenue of about $ 1.8 billion, more than 800% above what it saw the previous quarter. Coinbase also expects to record a net profit of between $ 730 and $ 800 million, compared to the $ 32 million it reported a year earlier. The company has 56 million verified users.
While the company clearly benefits from the growing interest in cryptocurrencies, experts predict that Coinbase’s shares will be volatile given its relationships with cryptocurrency trading activity and the price of popular cryptocurrencies.
See also: Coinbase has fueled “a big frenzy” and “this never ends well,” Novogratz bitcoin bull told MarketWatch
“To be prudent, we assume that the value of cryptocurrencies will continue to be cyclical, so we assume that Coinbase’s revenue for 2022 will be> 35% lower that in 2021, ”Moffett Nathanson analyst wrote in a note to clients on Tuesday. He argued that“ it is very likely that we are currently on the verge of reaching the maximum, ”with revenue projected by Coinbase in the first quarter only one 40% more than what the company published throughout 2020.
Still, Ellis chose to value the shares as a $ 600 target price, and defined the shares as an “extraordinarily rare asset” that was certainly not for the weak, but for investors who had a “multi-year” time horizon. investment.
See also: Five things to know about Coinbase when it goes public
Coinbase generates most of its revenue from trading with its cryptocurrency portfolio and another issue concerns the sustainability of the company’s commission structure. The company’s commissions are “an order of magnitude higher” than those that can charge U.S. stock exchanges and brokers, according to Bernstein analyst Harshita Rawat, who expects some pressure on this part of the business.
“Currently, companies like Coinbase (and smaller partners like Gemini) may charge higher rates (against peers) for newer / less advanced crypto-oriented products, as they differ in ease of use for new users. Rawat wrote, while predicting that it may ultimately be difficult for the company to maintain its current quota levels amid a competitive market for the crypto trade.
Aggarwal echoed some of these concerns, as he expects the company to face competition from “cryptographic exchanges as well as traditional exchanges,” although he believes Coinbase “will continue to have a competitive advantage.” , as there is room for rates to go down without them occurring drastically crashing.
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He also highlighted a smaller part of Coinbase’s business — its custody role that holds cryptographic assets for companies — as an intriguing part of the company’s strategy that differentiates Coinbase from traditional exchanges that do not usually perform this function. .
“While the commercial side may be volatile, the custodian aspect will be stable,” said Aggarwal, who noted that the custody business links companies to Coinbase for possible future business activity. More companies could feel comfortable using this service now that Coinbase is public, he added.