Coinbase Global Inc. became the most valuable US stock market on Wednesday amid strong demand for the new public shares of the cryptocurrency platform.
Shares of Coinbase COIN,
started trading at $ 381 / share at 13:25 on Wednesday, after setting a reference price of $ 250 on Tuesday afternoon, and rose to $ 429.54 before ending its first trading day at $ 328.28. Coinbase held a direct listing instead of a standard initial public offering, meaning that the company did not raise money through a stock exchange and did not have a traditional IPO price around the shares’ first-day march.
At the closing price, Coinbase was valued at $ 85.8 billion on a diluted basis. CME Group Inc. CME,
the next most valuable US stock market, has a market capitalization of approximately $ 74 billion.
Coinbase IPO: everything you need to know about the ‘watershed moment’ in crypto
The direct listing of Coinbase comes at the ‘perfect’ time for the platform, given the huge demand for crypto trading and record high prices for bitcoin BTCUSD,
says Reena Aggarwal, a professor of finance at McDonough School of Business, Georgetown University. She expects the company to attract huge interest, including from exchange-traded funds that want exposure to the world of cryptocurrencies but cannot actually own bitcoin.
The company predicts that it will report first-quarter revenue of approximately $ 1.8 billion, more than 800% higher than in the previous quarter. Coinbase also expects to generate net income of $ 730 million to $ 800 million, compared to the $ 32 million it reported a year earlier. The company has 56 million verified users.
Although the company is clearly benefiting from the growing interest in cryptocurrencies, experts predict that Coinbase’s share will be volatile, given its ties to cryptocurrency trading activities and the price of popular cryptocurrencies.
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“To be prudent, we assume that the value of cryptocurrencies will remain cyclical, so we assume that the income of Coinbase 2022 will be> 35%. lower than 2021, ”MoffettNathanson analyst wrote in a note to clients on Tuesday. She argued that ‘it is likely that we are currently approaching a peak’, with Coinbase’s expected revenue in the first quarter alone 40% higher than what the company posted for the whole of 2020.
Ellis chose Ellis to rate the stock a buy with a price target of $ 600, calling the stock an ‘extremely rare asset’ that was’ not for the faint of heart ‘, but rather for investors who’ have a “perennial” time horizon for them. investment.
See also: Five things to know about Coinbase when it comes out
Coinbase generates the bulk of its trading revenue in its crypto-wallet, and another question concerns the sustainability of the company’s fee structure. According to Bernstein analyst Harshita Rawat, who, according to US analyst Bernstein, expects some pressure on this part of the business, the company’s fees are “an order of magnitude higher” than US stock exchanges and brokers can hef.
“Currently, companies like Coinbase (and smaller peers like Gemini) can charge higher fees (compared to peers) for products aimed at newer / less advanced users on cryptocurrencies, as they differentiate themselves on the ease of use for new users,” said Rawat. wrote, while predicting that it may eventually be difficult for the company to maintain its current fee levels amid a competitive crypto-trading market.
Aggarwal reflected some of these concerns as she expects the company to face competition from “crypto exchanges as well as traditional exchanges”, although she believes Coinbase “will have a competitive advantage” because there is room for fees to come down without dropping dramatically. cracked.
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She also highlighted a smaller part of Coinbase’s business – its role as a custodian who owns cryptocurrencies for companies – as an interesting part of the company’s strategy and one that distinguishes Coinbase from traditional exchanges that do not usually have this function. does not serve.
“Although the trading office may be volatile, the custodian aspect will be stable,” Aggarwal said, noting that the custodian company is linking companies with Coinbase for possible future trading activities. More companies can become comfortable using this service now that Coinbase is public, she added.