Cryptocurrency exchange Coinbase soars in US market debut

Coinbase made a rousing debut on Wall Street, with shares of the digital currency exchange rising as high as 429 US dollars (£311), briefly giving it a market value over 100 billion dollars (£72.5 billion).

Coinbase Global Inc’s initial public offering happened with cryptocurrency chatter seemingly everywhere, even at the US Federal Reserve.

Digital currencies are being incorporated into business plans and accepted for payment by major corporations like Tesla, PayPal and Visa.

The San Francisco-based company’s listing on a public stock exchange is seen by some as an inflection point for digital currencies, as Coinbase’s fortunes are closely tied to Bitcoin, the most popular cryptocurrency.

Bitcoin’s price topped 64,000 dollars (£46,000) on Wednesday, up from 29,000 dollars (£21,000) at the start of the year, and Coinbase said recently that first-quarter revenue should total around 1.8 billion (£1.31 billion), exceeding its revenue for all of 2020.

Shares of Coinbase are listed on the Nasdaq under the ticker COIN, and closed at 328.28 dollars (£238), up 31% from the 250 dollar (£181) reference price set by Nasdaq ahead of the first trade.

That puts Coinbase’s market value at 85.78 billion dollars (£62.2 billion), making it one of the biggest publicly traded US companies — just 93 companies in the S&P 500 index have a higher market value.

Founded in 2012, Coinbase became popular among cryptocurrency fans by providing them with an easier way to exchange shares of Bitcoin and other digital currencies.

Unlike many newly public companies Coinbase is profitable — the company estimates it had net income of between 730 million and 800 million dollars (£530 million-£580 million) in the first quarter.

Dan Ives, analyst at Wedbush Securities, said in a note on Wednesday that “Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of Bitcoin and crypto for the coming years”.

Even as Coinbase made its trading debut, Federal Reserve Chair Jerome Powell described cryptocurrencies as “vehicles for speculation” in comments to the Economic Club of Washington.

He added: “No one is using them for payments, for example, like the dollar.”

Coinbase earns 0.5% of the value of every transaction that goes through its system.

So if someone buys 100 dollars in Bitcoin, Coinbase earns 50 cents. If Bitcoin or Ethereum prices drop, the commissions Coinbase earns drop as well, giving it some exposure to the digital currencies’ rise and fall.

Instead of using a traditional IPO, Coinbase went public through a public listing. That means it avoided the typical agreements with big banks that would buy thousands of shares and promote them.

A direct listing allows insiders and early investors to convert their stakes in the company into publicly traded stock.

Other recent direct listings include the music streaming service Spotify in 2018, the messaging service Slack in 2019 and the data-mining company Palantir Technologies in 2020.