Coinbase (COIN.US), the largest US cryptocurrency exchange, debuted on the Nasdaq exchange on Wednesday. Reference price has been set at $250 but strong demand caused trading to commence at $381 per share. However, shares began to move lower and ultimately finished the session at $328.28. Let's take a closer look at , so far, the hottest debut of 2021!
Debut via direct listing
Coinbase is the first major cryptocurrency exchange to debut on Wall Street. Company has greatly benefited from the 2020 cryptocurrency rally with full-year revenue increasing from $533.7 million in 2019 to $1.28 billion in 2020. Company has also swung from a 2019 net loss of $7.6 million to a 2020 net profit of $329.2 million. High valuation and popularity of cryptocurrencies and major improvement in Coinbase business in 2020 created a good environment for stock debut. Coinbase decided not to hold IPO and instead debut through a direct listing.
Direct listing differs from IPO as company's owners sell shares to the public directly on the market rather than through financial intermediaries. Direct listing is a cheaper option but support from intermediaries can help with marketing as well as placement of shares. However, given how hot topic cryptocurrencies are, marketing does not seem to be an issue for Coinbase.
Fees on cryptocurrencies trading are the main source of revenue for Coinbase. Just as it is the case with stock exchanges, fees are calculated as percentage of order value with a flat fee applying to orders with value below a certain threshold. However, Coinbase charges relatively high percentage fees compared to stock exchanges. In most cases Coinbase charges 1.49% of transaction value for buy and sell orders. This means that investors buying a single Bitcoin for $60,000 will have to pay a fee of $894! Another $894 would be charged if they decided to sell that Bitcoin immediately afterwards at a price of $60,000. Coinbase percentage fee can be as high as 4% for trades made with debit cards.
As one can see, Coinbase fee revenue is a result of not only the volume of traders but also the value of traded assets as well. Having said that, it can be easily seen why the ongoing bull run on the cryptocurrency market is beneficial for the company.
Lacklustre start of public trading
Coinbase shares finished the first day of trading 31.3% above the reference point of $250. However, the $250 reference point is just a line in the sand as, unlike in case of IPO, no shares were traded at this price. Yesterday's trading was launched with a big bullish gap above the reference point - shares started to trade at $381. A daily high was reached near $429 shortly after beginning of trading and share price began to move lower afterwards. Shares finished trading at $328.28, giving the company a fully-diluted market cap of $86 billion. However, shares are trading over 5% higher in Thursday's pre-market trading as investment funds started announcing stakes in the company and analysts began issuing upbeat recommendations.
Investors can find Coinbase shares on xStation platform under COIN.US ticker.
Coinbase (COIN.US) launched its first trading session way above reference price of $250. Stock reached a high near $429 and started to move lower later on. Trading finished around $100 below high price. However, current pre-market trades point to an over 5% bullish gap at the opening of the Wall Street session today. Source: xStation5