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Given the amazing growth of cryptocurrencies like Bitcoin over the past year, it’s no wonder that Coinbase’s (NASDAQ: COIN) IPO is one of the most anticipated market events of 2021. As the largest US cryptocurrency exchange, Coinbase generates massive revenue from transaction fees on its platform and has already given investors insight into its enormous earnings potential. It could just be a company that lives up to the hype surrounding its debut.
While this deal is certainly an element of unpredictability thanks to the volatility of cryptocurrency prices, it is unlikely to stop investors from snapping up shares in the company when it goes public on April 14th via a direct listing. Coinbase is certainly an intriguing player in the burgeoning cryptocurrency industry, which is why we’ve compiled a list of 3 things investors should know about the company before its big debut.
The first publicly listed US cryptocurrency exchange
Cryptocurrency has come a long way in a very short time. These digital assets are kept in a common ledger known as blockchain and have gained popularity largely due to the meteoric rise in Bitcoin price. As more businesses and financial institutions get on the cryptocurrency train, the potential is easy to see in a company like Coinbase. It offers users an easy and safe way to buy, sell and hold cryptocurrencies on its platform. Coinbase has also developed an advanced crypto trading platform called Coinbase Pro that cryptocurrency enthusiasts love.
The company generates revenue by charging transaction fees every time its users buy or sell a cryptocurrency on its platform. It also makes money from things like margin fees, custody services, and a rewards credit card program. The company’s platform enables around 43 million retail users, 7,000 institutions and 115,000 ecosystem partners to participate in the crypto-economy. As this is the first major US cryptocurrency exchange to be listed, it could be an important step in the widespread adoption of digital currencies and go a long way in legitimizing the industry. This is one of the main reasons the company’s debut is attracting so much attention.
Most high-growth companies celebrating their launches are far from being profitable. This is another big reason Coinbase is getting noticed. The company has already delivered some noticeable gains that could propel its stock price higher on April 14th. Coinbase had a very strong 2020, generating $ 1.1 billion in sales and $ 322 million in net income. Those were solid numbers for a company that has only been around since 2012, but what’s even more impressive is that the company already dwarfed those numbers in the first quarter of 2021.
Coinbase recently released its estimated earnings figures for the first quarter to investors, which likely added billions in the valuation of the company. The company reported sales of $ 1.8 billion for the first quarter, surpassing its sales for the full year of 2020. Coinbase had a trading volume of $ 355 billion in the first quarter, which exceeded the total trading volume of last year. Total assets on Coinbase’s platform rose from $ 90 billion to $ 223 billion, which is 11.3% of the market share of crypto assets. It’s also worth noting that $ 223 billion in assets includes $ 122 billion of institutions, which confirms that Coinbase is becoming a trusted name among discerning investors.
Direct listing compared to traditional IPO
Coinbase goes public on April 14th with a direct listing and is traded on the Nasdaq under the ticker symbol COIN. If you’re not familiar with direct listings, it’s likely because very few companies use this avenue to go public. Direct listings are unique in that when the company goes public, no new shares are created, only the outstanding shares are sold without the involvement of syndicate banks.
You may be wondering why Coinbase is going public with a direct listing via a traditional IPO. This likely has to do with money as the company can go public without paying heavy fees to the investment bankers. There is also a chance that Coinbase may want to avoid stock dilution or lock-up periods. Since the company doesn’t have to worry about generating interest and demand for its stocks, it could be argued that a direct listing makes sense.
While Coinbase is one of the most exciting companies to go public in recent history, it’s important to understand that the hype surrounding its market debut could result in an extremely high valuation. Some analysts estimate the company at around $ 80 billion, while others estimate it up to $ 100 billion. Keep in mind that market launches are usually volatile and that this stock is likely to mimic the price movements of large cryptocurrencies like Bitcoin. If you’re interested in adding stocks, it may be worth waiting for the initial hype to wear off and the stock to have some trading history before deciding to invest.
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