Dive Brief:
- Coinbase, the largest U.S.-based cryptocurrency exchange, has filed confidentially with the Securities and Exchange Commission (SEC) for an initial public offering (IPO), the company said Thursday in a blog post. The draft registration statement will become effective once the regulator completes its review process, subject to market and other conditions, the company said.
- The company did not speculate on the prospective value of a listing. But Bitcoin, the flagship currency in which Coinbase trades, has tripled in value in 2020 — starting the year at $7,194 before dipping as low as $4,106 at the start of the pandemic and charging to a high of $23,642 on Thursday, according to Yahoo Finance. Bitcoin surpassed $20,000 for the first time Wednesday.
- A public listing would force Coinbase to disclose its profits or revenue figures — something the somewhat secretive company has never done. Coinbase was valued at $8 billion after a $300 million funding round in 2018. A handful of smaller crypto-based companies trade publicly but none the size of Coinbase.
Dive Insight:
Coinbase's post Thursday did not speculate on timing, but the company stands to be one of the most eagerly anticipated IPOs of 2021. IPOs have raised more than $160 billion this year on U.S. exchanges, according to The Wall Street Journal. Sixty-three companies debuted listings in December, raising more than $23 billion, according to Bloomberg data.
DoorDash, on its first day of trading last week, closed at 86% above its initial price. Airbnb last week began its first-ever day of trading at $148 despite being valued at $68 at IPO.
Beyond this week's high-water mark in Bitcoin's value, the crypto space has seen a warming trend this year as businesses have shown more acceptance of the once-fringe investment.
PayPal said in October it would let U.S. account holders buy, sell and hold cryptocurrency in their PayPal digital wallets and use digital coins to pay for purchases starting early next year.
JPMorgan Chase this spring said it extended banking services to Coinbase and fellow crypto exchange Gemini. Other institutions such as Northern Trust, Standard Chartered and Fidelity are exploring crypto custody, American Banker reported Wednesday.
And a number of companies over the past few months — notably, MicroStrategy, Square and MassMutual — have plowed millions of dollars in spare cash in Bitcoin.
"It is a watershed moment for the asset class, both as a form of legitimization, and by providing a way for investors to bet on the crypto industry without betting on a specific asset," Kyle Samani, co-founder of Multicoin Capital, told Bloomberg. Samani is an investor in Coinbase.
Coinbase, which reportedly counts about 35 million users, was founded in 2012 by former Airbnb engineer Brian Armstrong and former Goldman Sachs trader Fred Ehrsam. New York's Department of Financial Services granted the company a BitLicense in 2017, and the platform is now licensed to operate in 44 states and Washington, D.C. It's also accessible in more than 100 countries outside the U.S.
The company has a history of keeping its finances close to the vest. It fought the IRS for two years after the agency in 2016 demanded to see details of 500,000 Coinbase user accounts. Coinbase in 2018 gave the agency access to 13,000 accounts.
Armstrong also made headlines in September for enacting a strict policy banning political activism at work. Coinbase offered buyouts to 60 employees who disagreed with the policy, according to Bloomberg.
Coinbase could lose more employees once it lists — particularly long-haulers for whom the IPO would offer liquidity for angel investments and the base to launch their own startups, Nic Carter, co-founder of crypto researcher Coin Metrics, told Bloomberg.
Armstrong, for his part, warned investors in a separate blog post this week about the Bitcoin value rally, saying Coinbase takes a "long-term view of the market."
"While we're always excited to see increased interest in crypto, it's also important to point out that this is not only a time of high volumes, but also price volatility," he wrote.
Coinbase has raised $547 million in the private market, according to Crunchbase. It is also a founding member of Diem, the digital currency project once known as Libra.
