Coinbase is planning to go public later this year or next year. The current question is how the SEC views altcoin transactions on the Coinbase platform.
Written by: Bybit
Key points
- Coinbase – one of the world’s largest Crypto currency exchanges, may abandon the regular IPO for listing.
- The latest valuation of the exchange is approximately US$8 billion, which has increased 400 times since 2012, with a price-earnings ratio of approximately 49 times and a price-to-book ratio of approximately 14.7 times.
- It is estimated that Coinbase generated revenue of US$543 million in 2019 and profit of US$163 million.
- The listing of Coinbase may truly change the rules of the game for the entire industry.
According to Reuters, Coinbase is planning a direct (unconventional blockchain-based IPO) listing later this year or next year.
This Crypto currency exchange has more than 35 million users and more than 7 billion US dollars in custody funds. Since its launch in 2012, it has facilitated approximately 220 billion US dollars in transactions. Recently, in the fourth quarter of 2018, Coinbase upgraded its custody system and transferred approximately 850,000 Bitcoins of its customers to a new address. Based on the current value (1 Bitcoin ≈ 9200 USD), its customer assets are estimated to be approximately 7.9 billion USD.
Although Coinbase has rapidly risen and continued to accelerate its growth, it still has to overcome multiple obstacles since its inception. According to a document reviewed by Bloomberg, Coinbase generated US$923 million in revenue and US$380 million in profits in 2017, which is a huge leap from the US$17 million in revenue created in 2016. Coinbase initially predicted that it will achieve revenue of nearly $1.3 billion in 2018 and a profit of $456 million. This aggressive forecast is an exaggeration-it may be (at least to some extent) a strategy to raise its stock valuation to more than $8 billion during the E-series financing period-and expected Also suppressed by the downturn in the bear market.
Source: Bloomberg
Despite the optimistic tone, BQ Intel-a blockchain data analysis company-painted a more conservative picture in its quarterly analysis report released in January 2020. According to the market intelligence agency, Coinbase generated US$529 million in revenue and US$159 million in profits in 2018; these two figures rose to 543 million US dollars and 163 million US dollars respectively in 2019, with a total net profit margin of 30%. Comparable to mainstream regulated counterparts.
Source: BQ Intel
From the above chart, Coinbase’s revenue from 2017 to 2018 dropped sharply due to the depreciation of Bitcoin and the shrinking customer base. The data collected by early-stage venture capital firm Tribe Capital also confirms this. The data shows that between December 2017 and September 2018, all monthly active users of Coinbase in the United States dropped by about 80%.
Coinbase finally achieved a certain degree of stable development in 2019. According to data retrieved from bitcoinity, transaction volume in U.S. dollars was flat, and transaction volume in Bitcoin fell by 3%.
Source: BQ Intel
Coinbase has successfully raised USD 547.3 million from nine rounds of strategic investments. The company’s list of equity investors is well-known, including Andreessen Horowitz, Mitsubishi UFJ Capital, New York Stock Exchange (NYSE), Institutional Venture Capital (IVP) and other well-known investors.
Source: Crunchbase
Coinbase’s recent E round of financing was led by Tiger Global Management in October 2018. The American hedge fund invested 300 million U.S. dollars in this emerging Crypto currency trading platform, and Coinbase was valued at 8 billion U.S. dollars in financing-400 times its initial valuation in 2012.
Source: Coinbase, Bybit Insight
The equity distribution of the entire series of financing is shown in the table above. The company’s Series E valuation is 49 times its estimated profit for 2019 and 14.7 times its estimated revenue for 2019. These data may seem alarming, but they highlight the state of the US stock market: it is not unusual for a booming company to have a market-sales ratio of 100 times.
Although some high-profile and widely reported failed investments have led to greater scrutiny by investors and a slight change in investor behavior, if the current market sentiment continues, this may be the best for Coinbase listing opportunity. The company’s decision not to raise funds in the IPO means that only existing equity holders have the right to sell stocks, thus reducing the additional sales pressure faced when the exchange fails to meet its listing valuation target.
Source: Coinbase, Bybit Insight
If Coinbase is successfully listed, it is likely to have a positive impact on the entire crypto industry. Not only will the prices of Bitcoin, Ethereum and other cryptocurrencies gradually rise, but the potential direct stock market listing on the exchange will remove barriers to use, thereby further “certifying” the industry and thus promoting mass adoption in the mainstream market.
Coinbase currently operates as a federal-level currency services company in the United States and has obtained licenses in every operating state. In addition, it has made significant investments to comply with the latest regulatory and compliance work, which may remove any potential barriers to direct listing and make this task smoother and more attractive.
The only remaining question is how the SEC (United States Securities and Exchange Commission) will treat altcoin transactions on the Coinbase platform. The SEC has always insisted in the past that Bitcoin is not a form of securities, nor is it within the scope of its supervision. However, some other altcoins can be classified as securities, and the SEC has previously regarded altcoins as “fraudulent and manipulative”. This may further complicate the classification of cryptocurrencies.
This may cause potential problems. We plan to closely monitor the latest developments in order to better assess the situation and solve the problem.