Reference Price for Coinbase (COIN) 'Ridiculously Low', Valuation Could Double on the First Day, Analysts Say

April 14, 2021 6:19 AM EDT
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Nasdaq stock exchange set a reference price of $250.00 per share on Coinbase (NASDAQ: COIN) ahead of today’s direct listing. This price values the regulated cryptocurrency exchange at over $65 billion on a fully diluted basis.

The reference price raised some eyebrows at the Wall Street yesterday as shares of the company were trading at $350.00 per share on the Nasdaq Private Market auction in early March, which valued the company at about $90 billion.

“I will not be selling any of my Coinbase stock to you at $250. Try again,” said Barry Silbert, the Founder and CEO of Digital Currency Group.

Other market analysts and commentators also believe that the set price is too low. The reference price is only indicative and it doesn’t mean that COIN will open on Wednesday at that price.

“Reference price seems ridiculously low as Coinbase shares changed hands at $350/share in early March. So odds are high Coinbase doubles on opening day,” prominent German financial markets commentator and author, Holger Zschaepitz, wrote.

Today’s direct listing marks an extremely important milestone for the entire cryptocurrency community. Coinbase will become the first regulated US exchange to go public and will is very likely to become one of the 100 most valuable companies in the world.

“It’s going to legitimize a lot of what these companies are doing. For one, it’s going to show just how big the industry is and how much it’s growing,” said Marcus Swanepoel, CEO of London-based crypto platform Luno, said of the Coinbase debut.

Bitcoin (BTC) price soared to a new record high early this morning as investors are bracing for today’s event.

“I’m not surprised the cryptos are running. Part of this is for the crypto community, nobody wants to be selling in front of the Coinbase offering. In the crypto market, if the sellers are on a selling hiatus, the price is going to keep going up...It’s kind of like you have a selling strike in front of the listing,” said Fundstrat founder Tom Lee.

However, some analysts are concerned that Coinbase’s business model is too dependent on market volatility. Although MoffettNathanson analyst Lisa Ellis started the coverage with a “Buy” rating on COIN and a price target of $600.00 per share, she also warned about the dependence on high crypto volatility.

“Some investment dollars may shift to ETFs (if/when they are approved by the SEC), crypto assets may see increased regulation (e.g., broader classification as securities), and trading activity may wane as crypto-assets mature, and their volatility decreases. For all of these reasons, we believe it is imperative that Coinbase succeed in diversifying its business into broader crypto technology infrastructure services, and we are closely watching its progress (e.g., the recent acquisition of Bison Trails, a blockchain PaaS company) in doing so,” she said in a note.

Some other market analysts are echoing the sentiment shared by Ellis.

“Crypto companies will need to figure out how to diversify their revenue streams eventually. I think right now we are still very much in the investment phase and the overall crypto pie will continue to grow,” said Hunter Merghart, who used to work at Coinbase before leaving to take the head role at cryptocurrency exchange Bitstamp.

Last week, Coinbase said that its revenue recorded an eye-popping growth to $1.8 billion while net income rose to between $730 million and $800 million from $32 million a year earlier.

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