The Coinbase “IPO” (actually a Direct Listing) is where the three worlds collide:
- Silicon Valley VC – the old Wild West
- Cryptoworld – the new Wild West
- Wall Street – the old Regulated East
This post – the first in a 4 part series – explores 5 reasons why this collision is so important.
- Coinbase is a US Regulated On Ramp to a global unregulated/permissionless network. If you live in America and are new to crypto, head over to Coinbase. It is regulated and easy. This is why American regulators will not try to kill Bitcoin, despite some temptations to do so; businesses like Coinbase will be a good source of prosperity and jobs. Although a US regulated on ramp to a global unregulated /permissionless network sounds like it is a problem there is a comforting analogy. This is like a commercial venture for open source software – like Red Hat or Automattic. Customers do NOT have to use the commercial venture but they will if it offers good value and convenience.
- The AOL of Crypto tag is not an insult. Back in the dinosaur era of 2017, Daily Fintech posted A Coinbase IPO in the post ICO landscape will be the AOL moment in a good way. The analogy still works even if we had to wait out the 2018 and 2019 crypto bear markets first.
- Coinbase have the data on this crypto bull market. If Coinbase issue an S-1 they may have good data indicating that this crypto bull market is still strong; they have far better data on this than anybody. The media spotlight on their IPO will also add fuel to this crypto bull market at least in the short term. Longer term, a technical feature of a Direct Listing is that there is no 6 month lockup period.; if too many pre-IPO investors sell early in Coinbase’s public life it may tank the price and that may create a negative spiral of crypto bear market impacting Coinbase fundamentals and so on. Stay tuned.
- This will be a Direct Listing – neither a Wall Street IPO or a Security Token. That is why we call it an “IPO” as it is not what we normally think of as an IPO led by big Wall Street investment banks. Coinbase will be publicly traded, but not via the process that either Wall Streeters or crypto fans really want. It might be a good middle ground or an ugly compromise; the market will soon deliver it’s verdict.
- Coinbase have the magic letters P and B in their Financials. B is billions. In 2020, Coinbase had over $1 billion in net revenue. Perhaps even more impressive in today’s market is P – Coinbase was profitable in 2020 – to the tune of over $300Mm.
P and B is good, but stay tuned for our analysis next week in Part 2 = Is Coinbase a good business?
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