Coinbase, the top US crypto exchange, said on Wednesday that it has registered 114.9 million shares for its direct listing on the Nasdaq, which it's opted for instead of a traditional IPO.
In a direct listing, companies float their existing shares directly to the market, instead of Wall Street banks tapping underwriters to set the opening price. (In December, the SEC changed its rule so that direct-listing companies can also issue new shares if they choose). It also allows Coinbase to avoid some of the more onerous requirements of an IPO, including using the pre-IPO road show. Slack, Spotify, and Palantir all went the direct listing route.
Coinbase announced its plans to go public in January 2021, and it filed its Form S-1 with the SEC in February, providing would-be investors with a detailed overview of a company going public, including its financial information and risk factors.
The S-1 filing revealed that the San Francisco-based exchange brought in a $322 million profit in 2020 on revenues of over $1.2 billion, making it a rare profitable unicorn in a recent parade of IPOs from hot tech companies that still lose money. Its profits have risen significantly since 2019, when it had a loss of $30 million on $533 million of revenue.
Coinbase's listing will be a milestone for the crypto industry, and will provided investors with a new way to get exposure to crypto without buying it directly.
The crypto exchange, which launched in 2012, has two main lines of business: its retail brokerage service, and Coinbase Pro, a more advanced exchange, where users can buy and sell cryptocurrencies directly from other users, and make more complex trades.
The business has grown significantly in recent years. According to its SEC filing, Coinbase now has 43 million "verified" users, and 2.8 million monthly active users. It makes the bulk of its revenue through its fees on its brokerage app.
But not everyone thinks that Coinbase's $100 billion valuation—based on private trading of shares ahead of its direct listing—is realistic, particularly in light of the growing number of competitors in the crypto field. New Constructs CEO David Trainer told Decrypt that Coinbase's huge valuation is based more on broader crypto bullishness than the company's fundamentals.
Rival crypto exchange Kraken is also exploring going public via a direct listing. The company won a bank charter in the state of Wyoming last year, and is aiming for a valuation of around $20 billion, a source with knowledge of the matter told Decrypt.
But currently, all eyes are on Coinbase. There will be potential hurdles, but backing what could be the next Facebook may be hard for investors to resist.