Coinbase to Go Public Through Direct Listing
The cryptocurrency market is still functioning with a lot of momentum, and it doesn’t look like a correction is lurking. The asset class is particularly volatile and can be subject to quick changes, but that hasn’t stopped its incredible growth.
There are several developments in the past two years that, in retrospect, make crypto adoption seem inevitable. Bitcoin is not too far from its peak price, and investors are certainly at the pinnacle of their bullish sentiment.
Coinbase IPO Explained
The combination of these has laid the groundwork for a slew of IPOs in 2021, both inside and outside the market. Of these, Coinbase is the most notable. As many as eight companies are considering going public, though Coinbase is by far the biggest name.
There is a palpable sense that the industry is at the beginning of a new phase. Increased lawmaker involvement, more services, and just better technology have served to prove the growing potential of cryptocurrencies. The public is also more aware of it, though one survey shows people being strikingly misinformed about it.
It’s clear that even professional investors no longer see Bitcoin and Ethereum, at least, as illegitimate assets. More companies have integrated it into their system, including PayPal, while others are directly investing in it.
Coinbase, like others, is seizing upon this public interest to go global, which is the ideal business move. The company has had its share of controversies in the past year, but that shouldn’t stop its stock from excelling.
What is a Direct Listing?
Instead of going public via an IPO, which BitMain did, Coinbase has opted for a direct listing. Companies choose direct listing if they don’t want existing shares to be diluted and/or want a cheaper option.
With a direct listing, the company doesn’t go through an underwriter. Management and employees can also directly sell their shares to the public.
CFO Alesia Haas, in a memo sent to employees,
“We believe a direct listing more closely follows the ethos of crypto and Coinbase because it democratizes access and opportunities for all investors,”
We don’t have much more information than that — not even the ticker. We’re also not sure which of the leading online stock brokers will facilitate the purchasing of Coinbase stock. We should hear more about this in the near future. The rumored share target is $200. Some analysts have estimated that it could hit a valuation as high as $200 billion.
Coinbase Will Be Under the Microscope
Coinbase will no doubt do well in the stock market. It is one of the most well-known entities in the market and has a great deal of clout. That said, the company is not free from scrutiny, and past events will focus eyes on it.
The most controversial incident of last year related to allegations of racism. The New York Times published a story in December 2020, in which former employees spoke of discrimination. Coinbase firmly denied the allegations, but it did do hefty damage to its reputation.
The company and its management have also vowed to remain apolitical. In the widely politically divisive year that was 2020, the public viewed the company’s stance as callous. CEO Brian Armstrong’s open letter pitching a business-first company, while Silicon Valley waded into the political discussion, drew much scorn.
But the flak that arrived from that has largely subsided. The real task for Coinbase will be to remain competitive as exchanges like Binance also go global. Despite the latter’s growth and other incidents, Coinbase’s 2020 performance was strong — with over $90 billion of assets on it.
The real test for the exchange will come as the public begins to invest in what is the first true crypto stock. It is a watershed moment for the industry, and will be pivotal for Coinbase’s future success.
Industry outsiders will want to keep an eye on Coinbase’s stock performance. It will be an indicator of what the larger public thinks of the crypto industry. The exchange itself will be glad to hold the mantle, at least before the inevitable arrival of other entities.
Cryptocurrencies are largely past the discussion of whether or not they constitute a legitimate asset class. All eyes will be on Coinbase, and it will be very interesting to see if professional investors take to it. It will give the crypto market great exposure, with the subsequent growth feeding back into Coinbase’s own development.
What do you think of Coinbase’s decision to go public? How will it impact the industry? Let us know what you think in the comments below.