Barcelona, April 20, 2021.- Digital currencies, cryptocurrencies have existed, until now, outside the regulation and standards of traditional financial markets, central banks, etc. Digital currencies are possible thanks to blockchain technology. They are the obverse and reverse of the same coin, never better said.
April 14, 2021 will be a historic day for cryptocurrencies, and for Blockchain, because that day it began to trade on the American stock market, Wall Street, Coinbase. Below we offer all the details of this fundamental operation for digital money.
Shares of Coinbase Global Inc., the largest U.S. cryptocurrency exchange, started trading Wednesday under the ticker symbol COIN. The company, founded in 2012, provides a variety of financial services focused on bitcoin and about 50 other cryptocurrencies. It is the first major crypto company to go public and did so through a direct listing.
The company’s stock opened higher on its first full day of trading Thursday, increasing to $349.20 before pulling back to hover around $333.
The shares made a rollercoaster debut on Wednesday. After opening at $381 on the Nasdaq Global Select Market, they rose as high as $429.54 in the first few minutes of trading—briefly giving Coinbase a valuation of more than $110 billion—before ending the session at $328.28. The exchange had set a reference price on Tuesday of $250, but no trades were executed at that price.
Coinbase fetched an $85 billion valuation on its opening day—a significant increase over the $8 billion at which the company was last valued in a 2018 fundraising round but below some analysts’ projections of $100 billion. It makes Coinbase worth more than both Nasdaq Inc., which has a market value of about $26 billion, and New York Stock Exchange parent Intercontinental Exchange Inc., at about $69 billion.
Coinbase Global Inc. fetched an $85 billion valuation in its stock market debut Wednesday, a watershed moment for an industry that began a decade ago as an experiment in digital money.
Shares of Coinbase, the first major bitcoin-focused company to test the U.S. public market, opened at $381 on the Nasdaq Global Select Market. They rose as high as $429.54 in the first few minutes of trading and ended the session at $328.28. Coinbase went public through a direct listing under the ticker symbol COIN.
Coinbase was last valued at about $8 billion in a 2018 fundraising round, but some analysts had projected its valuation could top $100 billion based on private market trading. It briefly topped that mark Wednesday before pulling back. The exchange had set a reference price on Tuesday of $250, but no trades were executed at that price.
The exchange had set a reference price of $250 on Tuesday, but no trades were executed at that price. While Coinbase was last valued at about $8 billion in a 2018 fundraising round, some analysts had projected its valuation could top $100 billion based on private market trading. It surpassed that level Wednesday before pulling back.
Investors should take the whipsaw moves as an indication of how this stock may trade, said Wedbush Securities analyst Daniel Ives.
“This is going to be a roller coaster,” he said, adding there would be many investors trading in and out of the shares. “Right now the Street is still trying to put goal posts around the valuation,” Mr. Ives said.
Founded by Brian Armstrong and Fred Ehrsam in 2012, Coinbase has grown into one of the most significant companies in the crypto market. It lists for trading about 50 cryptocurrencies besides bitcoin. Today it has more than 1,000 employees serving more than 56 million customers in 100 countries.
Coinbase’s debut on the public markets feels similar to when other sector-defining companies went public, like Netscape in the 1990s, said Barry Schuler, who is managing director of DFJ Growth Fund, a Coinbase investor and the former chairman and chief executive of AOL Time Warner.
“For both Coinbase and crypto, this is the graduation from the early, nascent days,” he said.
Direct listings differ from traditional initial public offerings in that companies take their shares to the stock market directly. Companies are able to save money that in a more traditional IPO would be shelled out to investment banks. This option to go public isn’t as common as traditional IPOs.
More on Coinbase:
- Coinbase Debut: Stock Price, Valuation and Everything Else You Need to Know
- Nasdaq Sets Reference Price for Coinbase Listing at $250
- Bitcoin and Dogecoin Prices Soar to Records Ahead of Coinbase Listing
- Coinbase CEO to Take Crypto Exchange Public After Bringing Bitcoin to Masses
- Dow on Track for Record Close
Although Coinbase didn’t raise any money in its offering, it ended the day as one of the largest tech debuts ever, based on market capitalization. Its valuation is comparable with Facebook Inc.’s on its first day of trading in 2012 and Airbnb Inc.’s last year.
“To a lot of people, crypto still seems like a sideshow,” said D.A. Davidson analyst Gil Luria, who has followed bitcoin since its early days. “Once you have a $100-billion-market-cap company that all they do is buy and sell crypto, it’s going to be the epiphany for everyone that this is real.”
It is typical for Silicon Valley companies to go public before they have turned a profit. Coinbase, however, is already in the black. In the first quarter alone, the company estimated it earned between $730 million and $800 million, more than double the $322 million it earned in all of 2020.
However, that in itself is a warning to potential investors, said David Trainer, the chief executive of investment-research firm New Constructs, who said the stock is richly valued at these levels.
“I think it’s probably a good company, but not a good stock at anywhere near the current levels,” he said. “The pricing is a function of investor sentiment and is not related to the underlying economics of the business or the basic laws of competition.”
Coinbase’s stock-market debut Wednesday marks a watershed moment for the cryptocurrency industry, which began a decade ago as an experiment in digital money.
Indeed, Coinbase’s fortunes are intricately tied to bitcoin’s wild swings. In 2019, a down year for cryptos, the company lost $31 million. Mr. Armstrong warned investors in Coinbase’s prospectus that there would be times the company doesn’t earn money.
In some ways, buying Coinbase is like making a bet on the entire sector, said Elad Gil, another early investor in Coinbase. “I view them as a really great index of crypto.”
U.S. regulators have viewed cryptocurrencies skeptically, often noting that criminals sometimes use the instruments to launder money. Federal Reserve Chairman Jerome Powell said Wednesday that he hesitates even to liken them to currencies, given that they are rarely used to purchase goods and services.
“We think of them more as crypto-assets, because what people call cryptocurrencies—they’re really vehicles for speculation,” Mr. Powell said. “It’s a little bit like gold. For thousands of years, human beings have given gold this special value that it doesn’t have from an industrial standpoint.”
Prices of cryptocurrencies surged to record levels Wednesday in anticipation of the Coinbase listing. Bitcoin hit a record of $64,829, and ether traded as high as $2,399, according to CoinDesk.
Other bitcoin-related shares were down, however. MicroStrategy Inc., which has been buying bitcoin aggressively since last year, fell 13%. Tesla Inc., which started accepting bitcoin for payments and whose founder, Elon Musk, is also a major proselytizer, edged down 4%. Riot Blockchain, a bitcoin mining company, slid 15%.
The Grayscale Bitcoin Trust, an over-the-counter trust fund that has become a key conduit for traditional investors interested in the sector, was down 6.2%.
Source: Wall Street Journal