Coinbase‘s trading debut drew in more than $57 million from retail investors, putting the cryptocurrency exchange among the most popular stocks to go public in the last four years, according to figures released Thursday.
Retail investors poured in $57.35 million into Coinbase on Wednesday when its direct listing on Nasdaq went live publicly, according to VandaTrack, which monitors retail investing activity in 9,000 individual stocks and ETFs in the US.
Coinbase accounted for nearly 7% of net purchases made by retail investors on Wednesday, with total purchases of US stocks and ETFs coming in at US$822 million.
Coinbase’s public debut was the fifth largest in terms of retail buying for newly listed shares since 2017, VandaTrack estimated. The largest was for Snap, with the social media company taking in $143 million in its first day of trading in March 2017. More recently, Rocket Companies, which runs personal finance and consumer service brands including Rocket Mortgage, logged $58 million from retail investors when it went public in August.
The collective profile of retail investors has been raised during the coronavirus pandemic in part as people have used stimulus money and time spent indoors during lockdowns working to make money from the stock market. A recent study by Charles Schwab released showed that 15% of all US stock markets investors began investing in 2020.
In the highly anticipated debut, Coinbase’s market value swelled to an intraday high of $112 billion, surpassing those of some of the largest companies in the US.
Coinbase shares during Thursday’s session rose, trading above $334 each. They finished Wednesday’s session at $328.28, below their open opening price of $381.
Coinbase, one of the world’s most popular and earliest cryptocurrency exchanges, made its public market debut on Wednesday, riding the wave of mainstream investors’ growing interest in digital currencies.
Coinbase’s highly anticipated direct listing resulted in its shares closing at $328.28 on Wednesday, giving the company a valuation of $85.7 billion – around 10 times what it was last valued at as a private company, according to PitchBook.
That’s up 31.3% from Coinbase’s reference price of $250. But because it opted for a direct listing, no shares traded at that price, instead opening at a price of $381.
CEO and cofounder Brian Armstrong’s stake – 2.75 million Class A shares and 36.9 million Class B shares – is now worth a combined $13 billion.
Two Coinbase executives, Chief Product Officer Surojit Chatterjee and Chief Legal Officer Paul Grewal, both of whom joined the company less than 15 months ago, have stakes worth a combined $957 million.
At Wednesday’s closing price, Chatterjee’s 2 million Class A shares are worth $657.2 million, while Grewal’s 915,331 Class A shares are worth $300 million.
Chatterjee joined Coinbase in January 2020 after having previously been at Google for 11 years. Grewal joined just last summer, leaving his four-year tenure as a vice president and deputy general counsel at Facebook.
Coinbase CEO Brian Armstrong said two of the biggest risks to cryptocurrency are cybersecurity and regulation.
The executive spoke with CNBC on Wednesday ahead of his company’s public debut via a direct listing. Coinbase is the first major cryptocurrency company to go public, representing the industry’s booming growth.
But as the company moves into the public market, Armstrong noted that scrutiny of Coinbase may also mount as people seek to understand the burgeoning business. And because of that, regulation of the industry poses one of the biggest risks to the market, a risk that’s “right up there with cybersecurity.” In its S-1 filing, the company explicitly listed cyber attacks as a risk factor for the company, given that Coinbase is an online platform that manages a digital currency.
“We’re very excited and happy to play by the rules,” Armstrong told CNBC, regarding potential regulation. “And basically, we just ask that, hey, we want to be treated on those level playing field with traditional financial services at the very least and not have any kind of punishment for being in the crypto space.”
The exec added that Coinbase is “very happy to engage” with US lawmakers on “how we can most thoughtfully build this industry and this company.” You can watch Armstrong’s full interview with CNBC here.
Coinbase will begin trading on the Nasdaq under the ticker “COIN” in a direct listing and has set a reference price of $250 per share. That is set to value the company at about $49 billion ahead of its public market debut.
Cryptocurrency has soared in popularity in recent years. The virtual currency is not issued or processed by the government but is instead managed on so-called blockchains, or encrypted databases. Coinbase is an exchange platform that allows users to manage that digital currency.
Bitcoin remains the most popular form of cryptocurrency – its price soared above $64,000 on Wednesday in the lead-up to Coinbase’s public debut, skyrocketing past a $1 trillion market capitalization. It only took Bitcoin 12 years to hit that milestone, which is three times faster than it took Apple to do so.
The cryptocurrency hit record highs in March, a boom that some experts have said was largely driven by stimulus checks. Institutional investors like Tesla and JP Morgan have also gotten involved, boosting Bitcoin’s success over the past few months.
Bitcoin rose as much as 2.6% to $61,229 on Monday as the crypto world prepared for a week dominated by Coinbase’s direct listing on Wednesday. The surge took the coin close to its all-time high of $61,742 reached on March 13.
The world’s biggest cryptocurrency has since pared gains slightly, trading at $60,429.68 as of 9:05 a.m. in New York.
“There’s a lot of anticipation, some restlessness, maybe some anxiety in crypto markets today,” Justin d’Anethan, head of sales at Nasdaq-listed exchange Equos, told Insider.
“With BTC solidly in the upper 50Ks, everyone is looking to see if we can reclaim or surpass that last all-time high… seen a couple of weeks back,” he said.
It will be the first listing of a major crypto company, with Coinbase pulling in around $1.8 billion of revenue in the first quarter of 2021. The exchange said private market transactions valued the firm at about $68 billion in March.
D’Anethan added: “Coinbase’s IPO is definitely a supportive move for the space as it is bolstering the legitimacy of the asset class and offering investors new ways to interact with it.”
Edward Moya, senior market analyst at currency firm Oanda, said in an email “a disappointing IPO or excessive concerns over enhanced regulatory oversight could weigh on bitcoin and the other altcoins.”
Bitcoin has more than doubled in 2021 thanks to a renewed interest in digital currencies supported by huge amounts of stimulus from governments and central banks.
Jessica Alba’s consumer goods startup Honest Company is going public.
The company filed for an IPO on Friday with plans to sell shares on the Nasdaq under the symbol “HNST.” It listed a placeholder IPO value of $100 million.
Diapers and wipes accounted for 63% of the company’s $300.5 million in revenue last year. Skin, personal care, household, and wellness items made up the rest of its sales.
While the company’s 2020 revenue grew about 28% from the previous year, it reported a net loss of $14.5 million. It has never been profitable on an annual basis since its founding in 2012.
“We have incurred net losses each year since our inception and we may not be able to achieve or maintain profitability in the future,” the company wrote in the risk factors section of its S-1.
Honest Company’s 2020 growth was driven in part by a bump in digital sales, which represented 55% of its revenue last year. Digitally-native brands like Honest, which sells products on Honest.com and digital retailers like Amazon, benefited from a overall shift to ecommerce last year as brick-and-mortar stores shut down during the coronavirus pandemic. US e-commerce sales rose 32.4% in 2020 to $791.7 billion, according to the US Census Bureau.
“We see consumers increasingly self-educating on the benefits of clean and natural products through social media, influencers and other online content, driving digital engagement and purchasing that supports continued outsized growth of the ecommerce channel,” the company wrote in its prospectus.
Alba started Honest Company with a mission to make consumer products that the actress deemed “clean,” excluding chemicals and materials like parabens and sulfates. The brand’s approach to labeling its products has led to trouble in the past. In 2017, the company settled a lawsuit that claimed it fraudulently labeled some of its products as “natural,” “plant-based,” or “no harsh chemicals (ever!).”
“Health and safety incidents or advertising inaccuracies or product mislabeling may have an adverse effect on our business by exposing us to lawsuits, product recalls or regulatory enforcement actions,” the company wrote in its risk factors section.
On the back of the eye-popping earnings, DA Davidson analyst Gil Luria increased his price target by 125% to $440 from $195. The analyst derived his adjusted price target from a 20x multiple based on the company’s expected revenue this year.
The record-breaking quarter for Coinbase moved in lockstep with bitcoin’s surge, which thus far has soared more than 100% year-to-date and 600% in the past 12 months.
Coinbase, the largest cryptocurrency exchange in the US, offers a wide range of products and services from trading and custody services to offering a stablecoin pegged to the US dollar. It has 43 million users in more than 100 countries.
Here’s what eight crypto-industry experts had to say about Coinbase’s public debut:
“The direct listing of Coinbase is a huge market signal, however, we’re yet to see whether the long-term effect on the crypto industry will be positive or negative … We are big fans of what Coinbase has done to date, but we worry about the centralizing effects of the concentration of users on a single platform, negating the true benefits of decentralization.” – Alberto Jauregui, growth lead of Pocket Network, a blockchain data ecosystem
“The Coinbase listing is a huge step for the digital asset industry from both a mainstream adoption and regulatory point of view, signifying the acceptance of cryptocurrency business in traditional finance. Other exchanges following in Coinbase’s footsteps are entirely based on their readiness to go public. This will pave the way for Coinbase’s competitors to join the IPO movement. Kraken will most likely be next.” – Gunnar Jaerv, COO of First Digital Trust, a leading digital asset custodian in Hong Kong
“The success of Coinbase and its direct listing will bring on the next wave of new users to cryptocurrencies by continuing to solve the challenges of owning, storing, and providing custody to digital assets. This public listing will also have an enormous impact on the entire digital asset industry by opening the gate to further Wall Street and institutional investment and confirming that the future of finance is decentralized.” – Leo Cheng, co-founder and project lead at C.R.E.A.M. Finance, a decentralized lending protocol
“Going public is stepping into the big leagues. Crypto is becoming part of the traditional finance sector … This level of adoption seemed like a dream scenario just a year ago. A lot of users still keep funds on Coinbase and look at it as merely a trading platform. But more are beginning to wake up and understand that Coinbase is an important gateway to getting started in the crypto sector.” – Kadan Stadelmann, CTO of Komodo, an open-source technology workshop and blockchain solutions provider
“When we entered into the market three years ago it was a new and novel industry, everyone had to wrap their heads around what we were doing as a business, the terminology we were using, and the potential value a bitcoin mining operation could hold. People saw us as a speculative gamble. This year we are seeing people move beyond that. Crypto is not a novel thing anymore, but the hot new asset class for equities.” – Emiliano Grodzki, CEO of Bitfarms, a global public bitcoin mining operation
“The growth and expansion of cryptocurrencies had always been at odds with the interests of traditional financial systems … The Coinbase direct listing unites these two sides of finance in the success of this licensed and regulated company. Traditional investors who purchase Coinbase stock will indirectly speculate on the crypto market and similarly, crypto traders who own Coinbase stocks will have a vested interest in the success of the company.” – James Anderson, CEO of RioDeFi, an ecosystem of interoperable financial products
“The Coinbase direct listing is going to further build credibility and legitimacy for the cryptocurrency markets, which have already received huge institutional interest and flows since the start of 2021. But once the celebrations settle and the mainstream awareness of the cryptocurrency markets grow, eyes will turn to the alternative burgeoning decentralized financial (DeFi) industry and structures like DAOs (decentralized autonomous organizations) will become common knowledge.” – Samantha Yap Founder and CEO at YAP Global, a PR agency specializing in crypto, blockchain, and fintech
The potential $100 billion valuation of Coinbase Global ahead of the cryptocurrency exchange’s trading debut is “ridiculously high,” said New Constructs CEO David Trainer, with an outline from the veteran stock analyst including his view that the company’s profitability faces the risk of being slashed.
Coinbase is set for a direct listing on the Nasdaq exchange on April 14. This week, the San Francisco-based company estimated a more than 800% jump in first-quarter revenue to $1.8 billion from a year earlier but noted that it is “very difficult to accurately forecast” revenue going forward because of market volatility.
“Even though Coinbase’s revenue surged over the past 12 months, the company has little-to-no chance of meeting the future profit expectations that are baked into its ridiculously high expected valuation of $100 billion,” said Trainer in a research note from New Constructs released Friday.
Coinbase is currently the largest cryptocurrency exchange in the US by revenue, and its platform offers access to Bitcoin, Ethereum, and Litecoin, among other digital currencies.
Coinbase is a standout among companies with recent IPOs because it makes a profit, said Trainer, with core earnings rising to $317 million from about $17 million in 2020 year-over-year.
But overall, Trainer said his “calculations suggest Coinbase’s valuation should be closer to $18.9 billion — an 81% decrease from the $100 billion expected valuation.”
Among Coinbase’s risks is competition as the cryptocurrency market matures, and that could lead to transaction margins at the company to fall “precipitously.”
He pointed to sharp competition in late 2019 between brokerages over stock-trading fees and said such a “race-to-the-bottom phenomenon” is likely to emerge among cryptocurrency exchanges.
“Competitors such as Gemini, Bitstamp, Kraken, Binance, and others will likely offer lower or zero trading fees as a strategy to take market share,” he said. Also, if traditional brokerages begin offering customers the ability to trade cryptocurrencies, that would “most certainly cut down on the unnaturally wide spreads in the immature cryptocurrency market.”
He said, for example, if Coinbase’s revenue share of trading volume fell to 0.01%, which is equal to traditional stock exchanges, its estimated transaction revenue in the first quarter of 2021 would have been just $35 million, instead of the estimated $1.5 billion.
“The crypto markets are very young and we expect many more companies to compete for the profits Coinbase enjoys today,” Trainer said.
Soho House, a London-based network of private social clubs located worldwide, has filed to go public in the US, Sky News reported Friday.
The company this week filed confidential IPO paperwork with the US Securities and Exchange Commission. Soho House could be valued at more than $3 billion (£2.1 billion), the report said, citing banking sources.
Soho House is aiming for a listing on the New York Stock Exchange, eschewing a listing in London with Sky News noting that the company is majority-owned by Ron Burkle, a billionaire from California who is the part-owner of the Pittsburgh Penguins hockey team and co-founder of private investment firm Yucaipa Companies.
Soho House’s founder is Nick Jones, who opened the original location in the west end of London in 1995.
The company two years ago decided to raise capital privately instead of filing for an IPO, the report said.
The network includes 27 houses in 10 countries including the US, Germany, India, and in Hong Kong. It opened its first US-based house in 2003 in the Meatpacking District in New York City.
Impossible Foods, the startup behind wildly popular vegan burgers, is exploring a public listing that could give the company a valuation of $10 billion, Reuters reported on Thursday.
At its last funding round in March 2020, the plant-based meat company was valued at $4 billion.
Impossible is now weighing options between going public via an initial public offering or a merger with a special-purpose acquisition company, Reuters said, citing sources. This could happen within a span of the next 12 months.
Financial advisers have been approached to help manage discussions with SPACs that have already extended offers at a lucrative valuation, sources told Reuters. The SPAC route could diminish the positions of existing shareholders more substantially compared to an IPO.
Impossible Foods was founded by CEO Pat Brown in 2011 when he was on a sabbatical from teaching biochemistry at Stanford University’s medical school. Brown previously told Insider he wished he gained an understanding of the meat industry earlier in his career, so he could’ve launched Impossible Foods sooner.
The company is backed by venture capitalists Khosla Ventures and Horizons Ventures, and more than a dozen superstar investors ranging from pop icon Katy Perry to tennis champion Serena Williams and rapper Jay-Z.
Shares in rival plant-based company Beyond Meat are trading more than 400% higher above its public debut price in 2019.
Several private companies are eager to be acquired by SPACs after a surge in popularity within the space last year. More than $98 billion has been raised across 306 SPAC IPOs so far in 2021, surpassing last year’s record of $83 billion, according to data from SPACInsider.com.
Many of these companies may be unaware of the legal implications of not fully understanding the disclosures they can and can’t make when going public. For this reason, the Securities and Exchange Commission has warned SPAC dealmakers of the risks and governance issues related with raising capital through blank-check firms.
Impossible didn’t immediately respond to Insider’s request for comment.
Deliveroo shares rose 4% on Wednesday as the company opened trading to retail investors, a week after going public on the London Stock Exchange to institutional participants only.
The food-delivery group’s shares opened at 288 pence ($3.96), giving it a market value of £5.2 billion ($7.2 billion). That is down from the £7.6 billion ($10.5 billion) valuation its IPO was priced.
Further turbulence is expected for Deliveroo’s shares as about 70,000 retail investors begin trading their stock.
Separately, some 400 Deliveroo riders are staging socially-distanced strikes on the same day that it opened up trading to amateur investors.
Protests over what they describe as poor working conditions and low pay will take place in London and four other cities in the UK, according to a statement by the trade union Independent Workers’ Union of Great Britain.
The riders are revolting less than two weeks after The Bureau of Investigative Journalism revealed that some riders earn as little as £2 ($2.76) per hour for delivering food to customers, far below the minimum wage.
“I’m going on strike for my basic rights and those of all the other riders struggling to get by and support families on Deliveroo poverty pay,” Greg Howard, a Deliveroo rider and chair of the union’s couriers and logistics branch, said in a statement.
Howard said he has seen work conditions at Deliveroo decline for years. After working through the lockdown, he said he became infected with the coronavirus and got “very little support” from the company. On its site, Deliveroo says it offers a relief fund for infected riders.
Another rider, Ethan Bradley, told the Big Issue: “I don’t know if I’m going to be able to make the rent next week, or pay the bills. Many riders have family, have dependents and have kids to feed,” adding that security of earnings “would mean so much to them.”
A Deliveroo spokesperson told Insider that the “small self-appointed” union does not represent a majority of riders who tell the company they value its flexibility and an ability to earn over £13 ($17.9) an hour.
“We are proud that rider satisfaction is at an all-time high and that thousands of people are applying to be Deliveroo riders each and every week. Riders are at the heart of our business and today we are beginning a new consultation with riders about how we should invest our new £50 million community fund,” the spokesperson said in a statement.
Shares in Deliveroo tumbled by more than 30% at its stock market debut on March 31, when only institutions were allowed to participate. The Financial Times said its IPO has been dubbed “the worst in the history of the London market.”
Goldman Sachs, one of Deliveroo’s underwriters, bought shares worth £75 million ($103 million) to boost its stock after its IPO dwindled, the FT reported on Tuesday.
The result of Deliveroo’s IPO was deflating for many investors in UK tech, according to Christian Nentwich, founder of financial tech firm Duco. He told Insider that although there are lots of good arguments about whether the IPO’s pricing was rightly set over workers’ rights and future business risk, “frankly, no one cares in other companies, outcomes matter.”
“Protests about dual-control structure, about the strategy of burning cash to fuel growth, and so on, are irrelevant – companies can simply list elsewhere,” he said.
But brands are as strong as their weakest link and for Deliveroo, problematic worker practices are its biggest challenge, said Sophie Lord, executive director of strategy at brand consultant firm Landor & Fitch.
“Major investment houses are looking at ESG seriously and have made it clear, they won’t tolerate a failure to engage. Whether the brand now has the lifeforce to overcome the scrutiny, time will tell – as will its share price,” she said.