Cryptocurrency exchange Coinbase has filed with the Securities and Exchange Commission (SEC) to go public via a direct listing. The company's IPO filing occurs during a time of increased interest and prices for the cryptocurrency ecosystem. Bitcoin (BTCUSD) has appreciated by more than 73% this year and recently crossed $1 trillion in market capitalization. More importantly, mainstream companies such as Tesla, Inc. (TSLA) and Square, Inc. (SQ), and institutional investors are gravitating toward the cryptocurrency, using it as a hedging tool against macroeconomic instability.
Coinbase, which is North America's biggest cryptocurrency exchange by trading volume, has a balance sheet that reflects recent volatility in crypto markets. It earned net income of $322 million on revenues of $1.14 billion in 2020, a significant improvement from its 2019 performance of $30 million in losses on revenue of $483 million.
- Cryptocurrency exchange Coinbase has filed to go public via direct listing.
- The San Francisco-based company derives 96% of its revenue from transaction fees for trading.
- It had income of $322 million last year, an improvement over its 2019 performance of losses amounting to $30 million.
According to business information platform Crunchbase, Coinbase has raised more than $547.3 million from investors since launch. Recent reports have suggested that it was valued at more than $100 billion in private markets. Coinbase is among a slew of technology companies that have opted to go public through direct listing – in which underwriters are not involved and new shares are not created – instead of an IPO. The company will list on Nasdaq and will trade under the ticker symbol COIN.
Crypto Markets Come of Age
The Coinbase IPO represents a coming-of-age for the nascent crypto economy. Bitcoin, which was launched more than 12 years ago, has largely been positioned as the antithesis of existing financial infrastructure, and Coinbase is its most visible symbol. The company occupies a prominent place in the crypto ecosystem. It was among the first cryptocurrency exchanges in the world and has a higher number of users – more than 43 million according to its filing – than The Charles Schwab Corporation (SCHW).
Coinbase has also benefitted from the identity shifts for cryptocurrencies over the years. Various avatars have been foisted onto cryptocurrencies, from their being a medium for retail transactions to a tool for economic empowerment. Each of these shifts generated news and drummed up additional interest in Coinbase and its products. More recently, the price volatility of crypto markets has found favor with investors searching for profits in an era of low interest rates.
To that extent, Coinbase's revenue is heavily dependent on transaction fees generated from trading on its platform. The company's filing states that 96% of its revenue comes from trading transaction fees. While retail traders still account for a major chunk of customers for Coinbase, the company's investor mix on its platform has broadened to include institutional investors. The 2017 run-up in cryptocurrency markets brought an influx of such investors to the company's platform, increasing their numbers from over 1,000 on Dec. 31, 2017, to 7,000 at the end of last year.