Crypto giant Coinbase is seeking an IPO amid strong user growth and its connections to financial institutions as well as rising crypto adoption will likely rally public investors.
Following speculation from a few months ago, the US-based crypto giant has filed to go public early next year, per its blog post.
The details of what type of flotation it will pursue are unknown. Founded in 2012, Coinbase has raised $547.3 million to date, the latest from December 2018, and holds an $8 billion private valuation. Coinbase offers a wide range of crypto products, including trading and custody services for both consumers and institutions, a stablecoin pegged to the US dollar, and a payment solution allowing merchants to accept cryptos.
Coinbase has become one of the largest global crypto exchanges by trading volume, although it has also faced speed bumps along the way.
The exchange experienced fast growth this year, as both consumers and institutions poured into crypto trading. Consumers are increasingly open to investing in crypto assets, with millennial trust in Bitcoin close to doubling since 2017 relative to their trust in big banks—although the consumer sample for this survey was likely skewed toward consumers already using cryptocurrencies. Riding this popularity wave, Coinbase added 5 million new users within the 12 months ending July 2020, now servicing over 35 million retail and institutional customers. In addition, institutional investments are also pouring in, with Coinbase scoring an additional $14 billion in institutional assets under custody, up from $6 billion in April.
But its opaque finances, regulatory friction, and recent mass employee walkout may give potential investors pause. Coinbase has never disclosed any profit or revenue figures. The exchange also fought a yearslong court battle with the Internal Revenue Service, refusing to share users’ account information. Public investors may be spooked by Coinbase’s unease at sharing its financials with the public or regulators. Additionally, 60 Coinbase employees, about 5% of its staff, left after being barred from talking about political and social causes at work—which could harm investor confidence in the leadership.
Despite crypto assets’ well-known volatility and this being the first major public crypto firm listing, investors will likely consider Coinbase’s IPO as a safe gateway to capitalize on the sector’s expected growth. Coinbase’s IPO announcement comes as crypto assets’ pricing is at an all-time high.
Yet the market’s inherent volatility could undercut the exchange’s plans if cryptos’ value collapses amid the IPO launch. Moreover, Coinbase will be the first US crypto exchange to go public, meaning it’ll do so with no hard evidence of public investor support for the space, unlike insurtechs, for example. However, these concerns will likely be offset by Coinbase’s ringing endorsement from large financial institutions (FIs): The exchange banks with JPMorgan and recently launched a crypto debit card powered by Visa.
It’s also audited by Deloitte, which should calm concerns about its mysterious finances. Finally, with consumer and institutional crypto adoption both expected to rise in 2021, per Insider Intelligence, public investors will likely rally to Coinbase to get a piece of its expected growth