Coinbase Global Inc. on Wednesday became the most valuable U.S. stock market amid strong demand for newly public shares of the cryptocurrency platform.
Coinbase COIN shares,
The stock began trading at $ 381 on Wednesday afternoon at 13:25 after a $ 250 reference price was set on Tuesday afternoon and rose to $ 429.54 before closing the first trading day at $ 328.28. Coinbase made a direct listing instead of the usual initial public offering, which means the company did not raise money during the listing and there is no traditional IPO price to measure the first day’s rally in the stock.
At the closing price, Coinbase was valued at $ 85.8 billion on a diluted basis. CME Group Inc. CME,
the most valuable U.S. stock market has a market capitalization of about $ 74 billion.
Coinbase IPO: Everything you need to know about the cryptographic “watershed moment”
The direct listing of Coinbase will take place at the “perfect” time of the platform due to the growing demand for cryptocurrency and record high prices for Bitcoin BTCUSD,
said Reena Aggarwal, a professor of finance at McDonough Business School at Georgetown University. He expects the company to attract a wide range of interest, including exchange-traded funds that want exposure to the world of cryptocurrencies but can’t actually own bitcoins.
The company expects first-quarter revenue to be about $ 1.8 billion, up more than 800% from a year earlier. Coinbase also expects net income of $ 730-800 million, compared to $ 32 million 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 shares will be volatile given its links to cryptographic trading and the price of popular cryptographic tools.
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“To be careful, we assume that the value of cryptocurrencies will continue to be cyclical, so we assume that Coinbase’s 2022 revenue will be> 35% Lower than 2021. He stated that “it is very likely that we are currently approaching the peak,” Coinbase’s expected revenue in the first quarter alone is 40% higher than what the company as a whole put in by 2020.
Nonetheless, Ellis decided to rate the shares at a price of $ 600 and bought the stock as an “extremely rare asset,” admittedly called “not for his weak heart,” but rather for investors with a “multi-year” time horizon. investment.
See also: Five facts about Coinbase as it goes public
Coinbase derives much of its revenue from trading in its cryptocurrency, and another issue concerns the sustainability of the company’s fee structure. Bernstein analyst Harshita Rawat said the company’s fees were “an order of magnitude higher” than what U.S. stock exchanges and brokerage firms can charge and expect some pressure on this part of the business.
“Currently, companies like Coinbase (and their smaller counterparts like Gemini) may charge higher fees (as opposed to peers) for products aimed at newer / less advanced users of cryptography – as they differentiate themselves from new products. ease of use. users, ”Rawat wrote, predicting that it might eventually be difficult for the company to maintain its current fee level in a competitive cryptocurrency market.
Aggarwal echoed these concerns as he expects the company to face competition from “cryptographic exchanges and traditional exchange programs,” although he believes Coinbase will “continue to have a competitive advantage” as there is room for a collapse without a dramatic drop in fees.
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He highlighted a small part of Coinbase’s business – its role as custodian, which provides cryptographic tools for companies – as an interesting part of the company’s strategy and as one that distinguishes Coinbase from traditional stock exchanges, which do not normally serve this function.
“Even though the trading side may be volatile, custodian considerations will be stable,” Aggarwal said, noting that the custodian will tie companies to Coinbase for potential future trading activity. Several companies can conveniently use this service now that Coinbase is public, he added.