Coinbase IPO: What can we learn from the pre-IPO Q1 earnings report?
Matt Weller, CFA, CMT April 7, 2021 11:01 AM
With such impressive financial figures, exponential growth, and seemingly-insatiable investor demand for IPOs , it’s not surprising that the fully-diluted Coinbase IPO valuation is expected to start in excess of $100B!
For those who haven’t been following closely, one of the biggest IPOs in years is scheduled for next week.
In the US, Coinbase is synonymous with cryptocurrency trading, and with major cryptoassets like Bitcoin and Ethereum near their all-time highs following massive surges so far in 2021, there’s never been a better time for the firm to IPO (or in its case, offer shares in a direct listing under the ticker COIN).
See our full primer on the Coinbase IPO by my colleague Josh Warner here.
In preparation for this momentous occasion, Coinbase published its estimated financial results for Q1 yesterday, and the numbers were staggering:
- Coinbase reported an estimated $1.8B in Q1 revenue (up from $191M last year)…
- …resulting in approximately $730M to $800M in net income (up from just $32M last year)…
- …on $335B in trading volume, up nearly 300% from Q4 2020.
- The firm has 56M verified customers…
- …with 6.1M customers transacting each month…
- …and holding a jaw-dropping $223B in assets in the platform.
Source: The Block
The firm also announced plans to spend billions on scaling and marketing in 2021 to maintain its aggressive growth. With such impressive financial figures, exponential growth, and seemingly-insatiable investor demand for IPOs (see Snowflake, DoorDash, Airbnb, and Roblox among others), it’s not surprising that the fully-diluted Coinbase IPO valuation is expected to start in excess of $100B!
Looking ahead, the most immediate risk for the company’s shares will be the ever-volatile price of Bitcoin and Ethereum. In yesterday’s filing, Coinbase noted that “MTUs, Trading Volume, and therefore transaction revenue currently fluctuate, potentially materially, with Bitcoin price and crypto asset volatility. This revenue unpredictability, in turn, impacts our profitability on a quarter-to-quarter basis… cycles can be highly volatile, and as a result, [Coinbase] measure[s] [its] performance over price cycles in lieu of quarterly results.” In other words, the Coinbase IPO represents a way for stock investors to get exposure to the ongoing bull market in cryptoassets, for better or worse.
The other major narrative to watch with Coinbase in the coming months will be institutional adoption. As management noted, “meaningful growth in 2021 driven by transaction and custody revenue given the increased institutional interest in the crypto asset class” is expected. IF (and it’s a big IF) large institutions continue to accumulate cryptoassets in the coming quarters, Coinbase should be a major beneficiary.
One way or another, next week’s Coinbase IPO will be a key measure of investor appetite in cryptoassets and IPOs generally – stay tuned to our site and social media channels for full coverage of the event!
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