CRYPTO MOVERS AND PRICES
Crypto is starting the week, for the most part, unchanged and quiet. Tether (USDt) and XRP continue to flip back and forth for 3rd largest crypto by market cap.
CRYPTO STORY OF THE DAY
Reuters recently reported that Coinbase was considering an initial public offering (IPO) and could even pursue a direct listing. We think this process could be an eye opener for investors who are unfamiliar with the strength of some crypto businesses.
Coinbase, which was founded in 2012, is the most active and well-established U.S.-based crypto exchange. They have a presence in most verticals of the crypto sphere and arguably have the most ingrained regulatory structure of any crypto business. In 2019, the company raised $300 million at a valuation of $8 billion, making their total capital raised as a private company $500 million.
Over the years, backers have included a “who's-who” of venture capital and even hedge fund investment with Andreessen Horowitz, Y Combinator, and Tiger Global Management to name only a few of those involved. The firm was said to have booked nearly $1 billion in revenue in the crypto-craze of 2017 and in the range of $600 million in a slower crypto market in 2019. While there has been movement among the executive ranks in recent years, CEO and co-founder Brian Armstrong has been a consistent hand at the head of the company since inception. He has been quoted as saying, “Someday I would love to run a public company.”
We believe that the success of some crypto companies is one of the more under-appreciated investment narratives in the space. While there is plenty of attention around unjustified gains in initial coin offerings, equity investments in successful crypto platforms has been a completely different story. Trading venues such as Coinbase, BitMEX, and Deribit all have seen in the $1 to 10 billion dollar range justified, without outlandish multiples, by billions of dollars in revenues and almost always significant profit margins (Coinbase was said to have had a 30% profit margin in 2017). We'd imagine that the size and profitability of Coinbase as being a surprise for many investors and could spur interest for searches for other firms on similar trajectories.