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It’s an interesting time for Coinbase.
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Bitcoin surpassed $63,000 Tuesday, bringing the cryptocurrency to a record high. Part of the reason for the jump was anticipation for the direct listing of Coinbase, one of the largest and most popular cryptocurrency exchanges in the world.
On Wednesday, Coinbase began selling its stock directly to the public on the Nasdaq exchange at a price of $250 a share. It flew past that number to more than $400 shortly after it was listed and has since settled to $399. In choosing a direct listing, which makes shares immediately available to all investors, the company is forgoing the conventional practice of an initial public offering, which usually channels early access to large institutional investors. Not only is it expected to be one of the largest public offerings of the year, but in going public, Coinbase will provide more proof for how established Bitcoin and the cryptocurrencies industry have become.
Here’s everything you need to know about Coinbase going public.
What is Coinbase?
Founded in 2012 by Brian Armstrong, a former Airbnb engineer, and Fred Ehrsman, a former trader at Goldman Sachs, Coinbase is a popular cryptocurrency exchange known for its intuitive, beginner-friendly interface. It provides an array of tools to help investors learn about different types of crypto — and rewards them with cryptocurrency for viewing educational tutorials.
More than 53 million users have Coinbase accounts, and use them to trade more than 50 cryptocurrencies including Bitcoin, Ethereum and Litecoin. Coinbase also offers a credit card to customers who want to make purchases with crypto, and a digital wallet to store crypto assets including NFTs.
When can I buy Coinbase stock?
Coinbase went public at 1:25 p.m. ET on the Nasdaq exchange. It initially had a reference price of $250 a share under the COIN ticker symbol, putting the company’s valuation at approximately $65 billion, according to the Wall Street Journal. The Nasdaq provided the reference price based on past performance metrics, but when trading of the stock started, it quickly shot up to $429. Share prices have since come down to $399 with more than two hours left in trading for the day.
Why is Coinbase using a direct listing?
In keeping with the subversive foundation of cryptocurrency, Coinbase’s decision to eschew an IPO isn’t altogether surprising. With an IPO, a company partners with financial institutions to promote its stock with the hope of selling shares to raise capital. A direct listing, in contrast, provides a venue for existing stakeholders in the company — who already own stock — to sell shares to the public. Coinbase stockholders will be looking to sell almost 115 million shares.
A direct listing, with shares trading in the open market without banks underwriting the offering, is generally considered a less expensive but riskier option for a company. Spotify chose to go with a direct listing when it went public in 2018, as did Slack in 2019.
Have there been any controversies at Coinbase?
Some crypto traders aren’t so hot on Coinbase’s practices. That’s mainly because of its fee for trading and buying crypto. Coinbase charges a 0.5% fee, while other exchanges charge from 0.05% to 0.1%. The other issue for some traders is the relatively small number of cryptocurrencies available to trade on Coinbase. There are more than 5,000 altcoins, a term referring to a cryptocurrency that’s not Bitcoin, and Coinbase trades just over 50 of those. One of the more popular altcoins not available for trade on the exchange is Dogecoin.
Back in 2018, Coinbase users found they were being charged on their Visa cards multiple times for transactions with the exchange. It turns out the credit card issuer had recently changed how cryptocurrency transactions were processed, which led to the multiple charges. Transactions were reversed for the people affected.
This past October, 5% of Coinbase’s employees left the company after CEO Brian Armstrong wrote a blog post calling for an apolitical workplace. Armstrong wrote a follow-up post to clarify his intentions.
What is the ‘Coinbase effect’?
Because Coinbase trades a limited number of cryptocurrencies, it’s developed a reputation as a kingmaker. The “Coinbase effect” refers to the sharp jump in a cryptocurrency’s value once it’s listed on the exchange. On average, prices for a newly listed coin can go up by 91% within five days.
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