Coinbase Looks Set to Reach $100 Billion Valuation
The cryptocurrency trading platform known as Coinbase, has been taking advantage of bitcoin’s 300% rise over the last year. Lined up to become the next big initial public offering in fintech, Coinbase recently publicized their plans to pursue a direct listing in order to sell shares directly to the public and avoid investment banks, who mainly serve as intermediaries and underwriters, altogether. Expectations remain high as far as market value, with Coinbase investors praising lofty expectations.
Although Coinbase declined to make a statement, their annualized revenue was nearly was $2.3 billion, or $600 million per quarter, according to an individual familiar with their finances. Another individual has stated that Coinbase’s profitability is on track with incumbent stock brokerages (like Schwab), with net profit margins at more than 20% – something quite unusual for a fast-growing, fledgling of a financial services company.
Olaf Carlson-Wee, founder and CEO of Polychain Capital (a crypto investment firm), stated “I think it’s headed north of $100 billion”. Carlson-Wee, who utilized Polychain to invest in Coinbase back in 2017, also once served as Coinbase’s first ever employee. Carlson-Wee believes Coinbase has a competitive edge thanks to their loyal customer base, complex technology, and regulatory licensing, “It’s the first legitimate IP from the entire block chain sector”.
While valuations for recently public fintechs continues to rise to new heights, Affirm, a pay later company, has been trading at a rate of nearly 40 times their past-year revenue. In contrast to an average stock listed on Nasdaq’s stock exchange, this rate is almost ten times higher by comparison. Bill.com, an online bill-payment service, trades at 48 times, while Lemonade, a New York based insurance company, trades for 84 times. In either of these cases, neither one is profitable. Coinbase, however, would be able to trade somewhere between 50 to 100 times past-year sales, if their full-year revenue of 2020 was between $1, and $2 billion – with a market value of $100 billion.
Where will Coinbase rise to in valutaion?
If Bitcoin continues to rise throughout this year, Coinbase would be better off going public – something they should be hurrying to do as soon as possible. In addition to the generous valuations dished out by public market investors, one must also consider the crypto market cycle. It would be best for Coinbase, rather than waiting until the end, to go public in a rising stock market. Some believe Coinbase, a San Francisco-based company, would succeed at pricing shares at a market value between $70, and $100 billion, while other reports peg Coinbase’s valuation around $50, to $75 billion. However, Coinbase anticipates going public with trading within the first or second quarters of 2020.
Although Coinbase hasn’t had technological or large regulatory stumbles, such as those experienced by fintech Robinhood, they have struggled with similar issues due to its corporate culture. Billionare Coinbase CEO, Brian Armstrong, drew harsh criticism last September for mentioning how Coinbase is a “mission-focused company”. Further explaining that it won’t engage in various social issues popping up around the country, especially since the pandemic began, including BLM protests, and more. Coinbase CEO extended severance packages to employees who found themselves at odds with the policy, which resulted in a 5% loss of 60 people.