Lack of information undermines its high valuation, which could be 70 times revenue, compared to 10 on the Intercontinental Exchange
All that bitcoin shuffling is worth something. But $ 100 billion? That’s what cryptocurrency exchange Coinbase Global is going to find out, which filed its direct listing request with the Securities and Exchange Commission on Thursday. Its growth and earnings suggest it is worthy of public shareholders, and the bitcoin hysteria helps it validate the price. But the lack of information undermines his assessment.
This house is one of the main points of sale of currencies such as bitcoin and ethereum. It boasts more than 43 million users, including 7,000 institutions and 115,000 of so-called ecosystems, merchants, and other developers who want to participate in electronic currency networks. The company claims that 96% of last year’s net income came from transactions, mostly from collecting commissions when buying and selling cryptocurrencies.
Revenue more than doubled in 2020 from the previous year to $ 1.3 billion, and more importantly, just eight years after launch, the Brian Armstrong-led company made $ 322 million in profit. The market is growing rapidly, and Coinbase is capturing a larger and larger share. The market value of crypto assets grew 150% annually between the end of 2012 and 2020, according to the company, and Coinbase’s share more than doubled to 11% in two years.
The bitcoin boom has helped, but that coin has two sides. The transaction fees depend on the volume and price of the cryptocurrencies. When bitcoin goes up, Coinbase makes more money. But the opposite probably happens when it falls. The problem is that investors cannot really know how much. Coinbase does not break down the financial results for 2018, when bitcoin lost about 75% of its value. But the volume of operations in the first quarter of 2019 was 7,000 million dollars, a fall of almost 90% compared to the same quarter of the previous year.
Recent gray market sales on the Nasdaq Private Market pegged its shares at $ 373 apiece, according to Axios, which puts its value close to $ 100 billion once incentives in the form of stocks and the like are considered. The Intercontinental Exchange, which manages the New York Stock Exchange, has a market capitalization of $ 63 billion, but six times more revenue and profits, suggesting that Coinbase is valued more than 70 times accumulated sales, while ICE is closer to 10 times.
It’s crazy, but if Coinbase’s revenue doubles this year, its valuation will drop to less than 40 times. Investors could settle for that, assuming they were given enough detail not to imagine the worst.