Coinbase Global Inc. became the most valuable stock exchange in the US on Wednesday, amid strong demand for the new public stock of the cryptocurrency platform.
Shares of Coinbase COIN,
started trading at $ 381 a share at 1:25 p.m., Wednesday, after setting a reference price of $ 250 on Tuesday afternoon and rising to $ 429.54 before ending the first trading day at $ 328.28. Coinbase held a direct listing instead of a standard initial public offering, which means that the company did not raise money through the IPO process and does not have a traditional IPO price to measure the rally on the first day of the action.
At the closing price, Coinbase was valued at $ 85.8 billion on a diluted basis. CME Group Inc. CME,
the next most valuable stock exchange in the US has a market capitalization of about $ 74 billion.
Coinbase IPO: everything you need to know about the “moment of the pool” in the crypto
Coinbase’s direct listing comes at the “perfect” time for the platform, given the booming demand for crypto trading and record prices for bitcoin BTCUSD,
said Reena Aggarwal, a finance professor at Georgetown University’s McDonough School of Business. She expects the company to attract widespread interest, including from exchange-traded funds that want exposure to the world of cryptocurrencies but cannot hold bitcoin.
The company expects to report revenue of about $ 1.8 billion in the first quarter, up more than 800% from what it saw in the previous quarter. Coinbase also expects net income of $ 730 million to $ 800 million, compared to $ 32 million a year earlier. The company has 56 million verified users.
While the company clearly benefits from the growing interest in cryptocurrencies, experts predict that Coinbase shares will be volatile, given its links to cryptocurrency trading and the price of popular cryptocurrencies.
See also: Coinbase has fueled “a lot of frenzy” and “it never ends well,” Bull Market Novogratz tells MarketWatch
“To be cautious, we assume that the value of cryptocurrencies will continue to be cyclical, so we assume that Coinbase revenues for 2022 will be> 35% lower than 2021, ”analyst Moffett Nathanson wrote in a note to clients on Tuesday. She argued that “it is quite likely that we are currently approaching a peak”, with Coinbase’s expected revenue in the first quarter, 40% higher than the company’s record for 2020.
However, Ellis chose to rate the stock as a $ 600 target purchase, calling the stock an “extraordinarily rare asset,” which, of course, “was not for the faint of heart,” but rather for investors. which have a “many years” time horizon for investment.
See also: Five things to know about Coinbase as it goes public
Coinbase generates most of its revenue from trading in its cryptocurrency portfolio, and another question concerns the sustainability of the company’s fee structure. The company’s fees are “on a larger order” than US stock exchanges and brokerages can charge, according to Bernstein analyst Harshita Rawat, who expects some pressure on this part of the business.
“Currently, companies like Coinbase (and smaller counterparts such as Gemini) may charge higher fees (compared to peers) for products aimed at newer / less advanced users to encrypt – as they differ in in terms of ease of use for new users, ”wrote Rawat, while predicting that it could eventually be difficult for the company to maintain its current level of fees amid a competitive market for cryptocurrency trading.
Aggarwal recalled some of these concerns, as he expects the company to face competition “from cryptocurrencies and also from traditional exchanges”, although he believes that Coinbase “will continue to have a competitive advantage”, as there is room for improvement. for taxes to fall without dramatically collapsing.
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She also highlighted a smaller part of Coinbase’s business – its role as custodian holding cryptographic assets for companies – as an interesting part of the company’s strategy and one that differentiates Coinbase from traditional exchanges that do not usually perform this function.
“Even if the trading side could be volatile, the custodian’s appearance will be stable,” Aggarwal said, noting that the custody business binds companies to Coinbase for potential future business. More companies could become comfortable using this service now that Coinbase is public, she added.