Highlights:
- The $100 billion valuation is more than that of the two largest stock exchanges.
- Coinbase shares opened at $381 each, traded as high as $429.54.
- Offering the COIN ticker helped Nasdaq score first big listing.
- Coinbase is radically increasing marketing spend to hold on to its market share.
Coinbase is an online platform that allows merchants, consumers, and traders to transact with digital currency.
It allows its users to create their own bitcoin wallets and start buying or selling bitcoins by connecting with their bank accounts.
Also, it provides a series of merchant payment processing systems and tools that support many highly-trafficked websites on the internet.
Coinbase was launched in 2012 with a mission to create an open financial system for the world. It is operated from San Francisco, California.
Coinbase shares opened at $381 each, traded as high as $429.54.
Cryptocurrency exchange Coinbase had a strong debut on Nasdaq on Wednesday, closing at $328.28 per share, according to CNBC.
Shares initially opened at $381 and went up to as much as $429.54 before dipping below their original price. Still, Coinbase’s strong showing was reflected in its initial market cap of $85.8 billion, making the cryptocurrency exchange more valuable than General Motors ($84 billion), FedEx ($76 billion) and Twitter ($56 billion).
Founded in 2012 to facilitate cryptocurrency transactions, Coinbase filed for a listing on Feb. 25. The SEC gave the exchange approval earlier this month to list its Class A common stock on the Nasdaq Global Select Market yesterday, which happened to be the day after Bitcoin hit an all-time high of approximately $63,000.
Coinbase’s $100 Billion Total Valuation.
Founded in 2012, the cryptocurrency exchange Coinbase is expected to go public in a direct listing on April 14 at a $100 billion valuation.
Coinbase takes a piece of every bitcoin transaction on its platform. In 2020, its revenues totaled $1.28 billion — 86% of which came from those transaction fees. Specifically, Coinbase nabbed about 0.57% of the $193 billion in crypto trading volume in 2020.
Coinbase revenues rose 139% in 2020 from $534 million in 2019, according to its prospectus. The trading volume on Coinbase soared nearly 142% in 2020 from about $80 billion in 2019.
In addition to the rapid growth, Coinbase made a $322 million profit in 2020 (compared to a $30 million loss in 2019).
High Valuation Compared to Stock Exchanges
Coinbase should be worth less than its $100 billion, according to MarketWatch. Its valuation “implies that its revenue will be 1.5 times the combined 2020 revenues of Nasdaq and NYSE parent, Intercontinental Exchange — two of the most established exchanges in the marketplace.”
Competition Could Drive Down Transaction Fee
Coinbase took in a transaction fee of 0.46% in the first quarter — that is 46 times higher than the fee charged by those two stock exchanges. Crypto trading rivals such as Gemini, Bitstamp, Kraken, Binance, and others, MarketWatch notes, could drive down transaction fees to zero — which would cut into Coinbase’s revenue.
Coinbase’s Increase in Marketing Spend
Coinbase may be concerned about competition and is substantially increasing how much it spends on marketing. Coinbase’s first-quarter update anticipated sales and marketing expense in the range of 12% to 15% of net sales. This is nearly three times what it spent in 2020.
