The crypto world has EXPLODED in popularity in the past several months. And, as a result, many new companies are either entering the space, or are deciding to go public after years of strong growth. Which brings us to some good news, Coinbase, the most well known US crypto exchange, has finally decided to launch its IPO! Crypto fanatics rejoice, as this is a major affirmation of the industry as a whole. Now investors will be able to own a piece of history (and profits) of one of the biggest growing crypto exchanges out there. In this piece, we analyze the fine print of the Coinbase IPO and make a prediction as to whether this will be successful or not. Will you be participating?
The crypto section of the internet is in ecstasy as multiple new companies are entering the public crypto space. This is a clear affirmation of the long awaited dream of decentralized banking.
We have been covering these companies for a while, way before the 1000%+ moves, because we know how lucrative the space is.
Which brings us to Coinbase, with the most recent IPO news.
According to Reuters:
(Reuters) -Coinbase Global Inc, the largest U.S. cryptocurrency exchange, has received approval from the U.S. Securities and Exchange Commission (SEC) to list its shares on the Nasdaq, paving the way for what will be a landmark victory for cryptocurrency advocates.
The company, which plans to go public through a so-called direct listing, expects to list its shares on the Nasdaq under the ticker ‘COIN’ on April 14.
In a regulatory filing last month, Coinbase said its stock in the private market traded at a weighted average price of $343.58 in the first quarter of 2021 through March 15, a nearly 13-fold jump in its valuation to around $68 billion in the space of a few months.
To summarize: Coinbase IPO launches on April 14, 2021 under the symbol “COIN” on the NASDAQ.
We anticipate a significant amount of hype and pumping in the first round, so mark your calendars!
But will it be worth your investment dollars to buy directly into the Coinbase IPO?
To answer that, we must look at the S1 details, financials and the opening price.
Coinbase S1 Highlights
First, let’s check out what Coinbase actually does, and what value it provides to potential investors.
Having a strong value proposition is generally the best way to discover new trends and ensure your investment appreciates in the future.
We only look for high quality companies and setups before investing. No scams, and no BS.
So what does Coinbase actually do and what is their value proposition?
According to the S1 Prospectus details:
Coinbase powers the cryptoeconomy. Our mission is to create an open financial system for the world. Today, the way that we invest, spend, save, and generally manage our money remains cumbersome, inaccessible, expensive, and regionally isolated. In contrast, the internet has transformed our society by connecting the world and enabling the seamless exchange of information.
Customers that start with us, grow with us as they experience the benefits of the open financial system by using crypto-based products for staking, spending, saving, and borrowing. Today, our platform enables approximately 43 million retail users, 7,000 institutions, and 115,000 ecosystem partners in over 100 countries to participate in the cryptoeconomy.
There are a few things to note here.
- Coinbase is one of the top platforms for crypto investing, there is no doubt.
- They are growing VERY fast. According to this prospectus, there are a whopping 43 MILLION retail users, 7000 institutions and an endless list of partners in 100+ countries…
You know what we always say when we see these kinds of numbers….
Coinbase Financials Breakdown
Now onto the best part, the financials. A company can sell you a dream, but without the financials, it is not worth anything.
In the case of Coinbase, the financials are strong to particularly quite strong.
According to the same S1 document:
According to this filing, the company generated $1.27 (Billion) in total revenue in 2020, which is an over 100% increase from 2019’s 530 Million in revenue.
Such wow, much bullish!
And for the finale, and the most surprising aspect of this filing…the net profit.
Historically, most companies that IPO are actually taking a big loss. Particularly tech companies.
Fortunately for potential future Coinbase investors, you do not have to worry about that, considering they made a net profit in 2020.
This is unheard of!
In fact, just in 2019, they lost ~$30M on their total revenue. And, within a year, actually managed to generate a net income of $322 Million dollars.
Oh, and they have a lot of cash…
Coinbase IPO Prediction
Now that we have all of this information, it is time to make a prediction.
Based on the hype surrounding cryptocurrencies and the details within this S1, we can predict that this will be one of the top IPOs of all time.
Yes, of all time. This is no exaggeration.
If the information in this S1 is correct, the Coinbase IPO is going to be Bananas Parabolas, to use a technical market term we just made up that sounds like Latin. This term is only applied to the most bullish predictions we make.
There are a few variables that have led us to this conclusion.
- Cryptocurrency hype continues to stay strong. In fact, Ethereum just hit a new all time high. (we recommended buying the dip in February at ~$1300. Now $2050+ as of this writing). Bitcoin is also not far behind.
- Financials are very strong. As aforementioned, the company’s total revenue grew by over 100% and is now profitable.
- Major increase in users. The rate of growth in users and cryptocurrencies being listed will serve to massively increase the long term value of the company.
Conclusively, it is very likely that the Coinbase IPO will be one for the history books.
But be warned…
Although we are very bullish on the company long term, we need to add a big CAVEAT EMPTOR (buyer beware) on this one.
As with many IPOs…remember that the current anticipated valuation is quite excessive.
According to CNBC:
Cryptocurrency exchange Coinbase has reached an implied $68 billion valuation ahead of its highly anticipated direct listing on the Nasdaq.
The latest valuation is based on a volume-weighted average share price Coinbase cited in a revised S-1 filing released Wednesday. The company reported private shares trading at $343.58 apiece for the first quarter of 2021 ended March 15, which increases the company’s valuation 13-fold.
Although the company has a strong user base and lots of hype, there is a chance that the IPO valuation will bring this to $100 Billion. That is quite excessive, despite the long term prospects.
As a result, if you want to be a long term investor and get a good price on your COIN shares, we recommend waiting for the post-IPO hype to die down a little.
As with all “tech” IPOs, the hype is usually around the first week or so of the company. There is always room for early stage investors to dump their shares, and even follow up offerings if the price is too strong.
No need to worry, the stock will trade for a long time, barring any hypothetical fraudulent activity. There is no need to buy into an IPO at the height of the hype cycle.
For example, we recently wrote an article titled “Why You Should Wait To Buy Roblox Stock IPO” on the recent RBLX stock IPO. Obviously the hype died down a little and the stock is now currently trading around the IPO price. It might go even lower.
In any case, you get the point. IPOs are great, but there will almost inevitably be a window to buy the stock at a lower price. And Coinbase will, most likely, be no different.
What do you think of the Coinbase IPO? Comment below!
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