When an airplane is getting ready to take off, before it starts moving, you can hear the engines going full throttle, giving the plane the burst it needs to get off the ground. Coinbase, set to go public on the Nasdaq on April 14th, under the ticker COIN, received that full-throttle boost from its recently published 2021 quarter-one results.
It was an important boost as Coinbase will become the first crypto exchange to go public.
Coinbase’s IPO — a direct listing
The IPO will be a direct listing, meaning there are no underwriters setting a target price or book building process which values the stock at a certain price. The company will simply list its share on the stock exchange.
Because there are no underwriters, meaning no one is assuming the risk in connection to reselling the stock shares or performing stabilising transactions, there is the potential for high volatility of the stock price immediately after its listing.
Coinbase will be selling 114 million shares directly to the public according to its SEC filing. Aside from that, there is no fixed or determined amount of shares that will be for sale as other shareholders may or may not sell their shares.
The company will not be paying dividends on its stock, nor does it plan to pay dividends to shareholders in the future. Coinbase writes that it intends “to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our capital stock in the foreseeable future.”
What is Coinbase
Coinbase began its operations in 2012. The company’s stated goal was simple: anyone, anywhere should be able to access Bitcoin easily. To achieve this goal, Coinbase built an Internet platform that allowed customers easy access to Bitcoin and other cryptoassets.
In its SEC filing, the company compares its effect on the cryptoeconomy to that of Google in the search engine field from the perspective of providing an easy-to-use platform which facilitates and drives an increased number of users.
The statistical breakdown of trade volume on the platform in 2019 was 58% Bitcoin, 14% Ethereum, 10% Litecoin and 18% other cryptoassets. In 2020, the addition of many other cryptoassets pulled trading volume away from Bitcoin, which accounted for 41% of the trading volume, while other cryptoassets accounted for 44%, and Ethereum made up the other 15%.
Who uses Coinbase
The company identifies three types of clientele. There are retail users, i.e., individuals using the platform for all things crypto on a personal level. On the business level, there are institutional investors — such as hedge funds and money managers — and ecosystem partners who may use Coinbase’s platform as a part of their business.
As of the end of 2020, Coinbase reported having 43 million retail users, 7,000 institutions and 115,000 ecosystem partners spanning more than 100 countries.
How does Coinbase generate revenue
The lion’s share of revenue is generated from transaction fees on trades made on the platform. This fee is based on the price and quantity of the crypto that is purchased, sold, or withdrawn. Transaction fees accounted for $463 million of $535 million revenue in 2019 and just under $1.1 billion of a total of $1.27 billion in 2020.
Impressive first-quarter statistics
As mentioned earlier, Coinbase reported impressive first-quarter estimates last week, as it gets ready for its April 14th IPO. The estimated first-quarter results were as follows:
- 56 million verified users, an increase of 13 million users since the end of 2020, and a total increase of 24 million since the end of 2019.
- 6.1 million monthly transaction users, an increase of 3.3 million since the end of 2020 and up more than 5 million since the end of 2019.
- Assets on their platform (meaning the total value of the assets), which is determined by price, quantity, and type of crypto being held by Coinbase customers, was $223 billion up from $90 billion at the end of 2020, and increasing 13-fold since the end of 2019, when it had $17 billion in assets.
- Coinbase’s assets represent an 11.3% market share of cryptoassets, up from 11.1% at the end of 2020, and from 8.3% at the close of 2019.
- Total revenue was approximately $1.8 billion, up from a yearly 2020 revenue of $1.27 billion, and a $533 million revenue in 2019. If compared to the last quarter of 2020, total revenue increased threefold, from $5.85 million to $1.8 billion. In the final quarter of 2019, total revenue was only $98 million.
- Net income was approximately $730 million to $800 million for this first quarter, up from a 2020 annual net income of $322 million.
The advantages and risks of Coinbase
Coinbase’s sole focus on the crypto field allows it to adapt to new crypto-related developments and, thus, remain a central player in the field. The company plans to launch new crypto-related products in the future and add more assets to its platform.
Coinbase sees itself as the default starting point for those looking to enter the crypto economy, and believes that with increased exposure, it will attract more clients. In addition, to date, the company says there have been no security breaches to its platform.
One of the main risks facing the company is the volatility of the crypto market. The company’s revenue, assets, and operations are dependent solely on the crypto market. Other risks include entering a highly regulated environment, the danger of security breaches to the platform, and the highly competitive nature of its field.
Investing in Coinbase stock on eToro
- Go to the Coinbase stock page by either typing in Coinbase or its ticker symbol COIN in the search box at the top of the page.
- Click on the “Trade” button.
- Choose whether to BUY (go long) or SELL (go short) the stock. Clicking on “BUY” means you expect the value of the stock to increase. Clicking on “SELL” means you expect the stock’s value to decrease.
- Insert your preferred leverage, and Stop Loss and Take Profit points.
Important reminder: long, non-leveraged positions incur 0% commission on eToro.
- Click on the “Open Trade” button.
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