Hello everyone, welcome to BudgetHolics! In this video I’ll share my thoughts on Coinbase’s IPO, scheduled for April 14.
On April 1st, Coinbase tweeted that it’s going public via Direct Listing. If you’re unfamiliar with Coinbase, along with Kraken and Binance, it’s one of the largest crypto exchanges! Many people speculate that it’s going to be the largest IPO of 2021. Coinbase’s IPO is another event bridging the gap between cryptocurrencies and traditional finance.
Coinbase released its S-1 filing earlier this month. It's total revenue increased by 139% Y-o-Y, from 2019 to 2020, with a profit margin of 26%. Being a Tech company that is already profitable is a great plus for its IPO. What's more, in their announcement of the company's Q1 2021 profits, Coinbase announced a Total Revenue higher than that of the entire 2020 FY. Moreover, their profit margin also increased to 40%.
In a funding round in 2018, Coinbase was valued at $8bn. On March, according to CNBC Coinbase is now worth $68bn. The article writes:
"The latest valuation is based on a volume-weighted average share price Coinbase cited in a revised S-1 filing released Wednesday. The company reported private shares trading at $343.58 apiece for the first quarter of 2021 ended March 15, which increases the company’s valuation 13-fold."
Since the Q1 2021 Results Announcement, the company's valuation may have increased, potentially up to $270 bn.
This brings us to the main question when it comes to stocks and stock videos. Should you buy the stock? Will coinbase be the new tesla? Will you 2x, 5x or 10x your money? Before I answer this question I should point out that I’m not a licensed professional, that this channel is for entertainment purposes only, and that you should always do your own research when it comes to investing.
The answer to this question largely depends on your attitude towards bitcoin and cryptocurrencies in general. If you’re a bitcoin bull, and you believe that Cryptocurrencies will become an ever increasing part of everyday finance, that more people will start investing and transacting in crypto, and that more companies will start accepting crypto payments, then investing in Coinbase stock would be the next logical step. Coinbase, however, differ from other companies in that most of its revenue comes form transaction fees. It is therefore the Fear of Missing Out and FUD (Fear, Uncertainty and Doubt), that fills investors with the impulse to buy and sell crypto during market Ups and Downs that will further increase Coinbase's profits.
There are more factors to take into account when investing in a company, even in the case of Coinbase with cryptocurrencies holding such immense potential. Does this company have a competitive advantage? Can it do something that other companies can’t? To answer this question, although there are a number of other platforms that have lower fees, or provide more options than Coinbase pro, Coinbase, in my view, is still the best platform to buy crypto for new investors. That being said, I believe that by 2025, a number of other platforms will have gone public, with Kraken already having announced their Direct Listing in 2022, and Gemini - potentially - soon to follow. Another thing to consider is the price. Again, as with any company, you should make sure that the stock is priced at a fair value. I do expect a lot of speculation to drive up Coinbase price, especially due people having easier access to trading via platforms like Robinhood. And since we don’t currently have any information about the price, other than CNBC's $300/share estimate, I can’t say whether Coinbase will be a buy or not. The fact that it’s an already profitable tech company is always a plus.
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