• Sir Baller

Stock Pick Alert: Coinbase Direct Listing 4/14/2021

Updated: Apr 9



Fundamentals


Coinbase will be holding a direct listing on Nasdaq on April 14, 2021 under the ticker symbol COIN. They will register 115 million Class A common stock shares. Last month, Coinbase set its valuation at $68 billion, resulting in an average share price of $343.58. However, with a direct listing they may set their share price at whatever price they wish on the listing date. In February, Axios provided a valuation of about $100 billion.


According to its SEC filing, since its inception in 2012 Coinbase boasts a total lifetime trading volume of $456 billion and $90 billion in assets is currently held by users on the platform. They currently have 43 million retail users and 7,000 institutions in over 100 countries registered on the platform.


In 2019 Coinbase's net revenue was about $483 million and more than doubled in 2020 to $1.14 billion. In those same years, respectively, their net income increased from a loss of $30 million to a gain of $322 million. Coinbase recently disclosed its cash and cash equivalents as of December 31st to be about $1.05 billion, of which approximately 30% is a conglomeration of cryptocurrency assets.




Analysis


Booyah Traders is rating Coinbase a STRONG BUY


Coinbase's listed holdings of about $300 million in cryptocurrency assets are relevant to the end of 2020, before the recent explosion in which bitcoin doubled in price and many altcoins tripled or more in price, as detailed in my previous newsletter. This not only increases the valuation of their holdings, but it has exponentially increased attention and investment in cryptocurrencies, in the USA and worldwide. The US government has made it difficult for citizens to obtain cryptocurrency assets and Coinbase has proven itself to be the most accessible platform to do so. With only 15% of Americans owning cryptocurrency assets, their userbase and trading volume will continue to grow for years to come.


The mixture of extreme retail investor interest and Wall Street starting new cryptocurrency ETFs will soon result in a cryptocurrency price explosion. This in turn will draw more interest in cryptocurrencies. Anyone paying attention to cryptocurrency based news knows that every week hundreds of millions of dollars worth of assets are being moved off major exchange platforms into offline private wallets. These assets are being moved in large chunks at a time, meaning that they are being performed by single buyers, either very wealthy people or wealthy corporations. In February, Coinbase helped Tesla acquire $1.5 billion in bitcoin and they have been instrumental in handling institutional investment. Most companies and wealthy people keep this information secret however, so it is often not publicly available information.


Fees from asset trading provides 96% of Coinbase's net revenue and they have just begun monetizing additional income opportunities such as subscription products and services. These services experienced a 126% growth rate from 2019 to 2020 and Coinbase realized a net revenue increase of 90% per user that engaged in one of these products.


If shares go on sale at Coinbase's original $68 billion value they will obtain about $40 billion in stock sales. The shares will likely be listed at a higher price, resulting in more cash entering Coinbase's coffers. Exchanges like Coinbase must hold large quantities of cryptocurrency assets for traders and they will likely use the newly acquired funds to purchase billions or tens of billions of dollars worth of more assets. This will result in an immediate surge in cryptocurrency prices, which will in turn result in a higher share price value for Coinbase.


Cryptocurrency isn't going away and Coinbase is the largest crypto exchange. Its valuation sounds rather expensive until you delve into the company's fundamentals. When you look back years from now, a $100 billion valuation will be peanuts and you will be wishing you bought more.


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