The US-based crypto exchange made public its long-awaited S-1 filings. Here’s everything you need to know.
Inside the Coinbase filing
The Initial Public Offering (IPO) filing of Coinbase, the remote-first crypto exchange that caters to millions of users daily, to the US Securities and Exchange Commission (SEC) was made public today.
The exchange has long-wished to go public and the filings reveal details about its profitable, impactful business and show the exact metrics that were sent to institutional firms.
Coinbase posted a net profit of over $322 million in 2020, against revenue of over $1.1 billion. This was largely generated via trading fees and other user-facing features provided by the exchange. Its operating expenses were over $860 million, and Coinbase said it had over 2.8 million “transacting customers” on its platform.
Its lifetime trading volume was recorded at over $456 billion, with the firm currently holds over $90 billion worth of crypto assets on its platform.
Coinbase S1 notes:
• $3.4 billion in total revenue until 2020
• largely from transaction fees (96% of net revenue)
• net income of $322.3 million in 2020, net loss of $30.4 million in 2019
• 43M verified users
• 2.8 monthly transacting users— Larry Cermak (@lawmaster) February 25, 2021
In terms of users, the exchange said it was used by over 43 million retail customers, 7,000 institutional firms, and over 115,000 “ecosystem” partners from over 100 countries in total. The retail userbase increased by over 100% since 2018, when the exchange had a relatively lesser 23 million retail accounts.
At the time of filing, Coinbase had the following cash and crypto-asset holdings: Cash and cash ‘equivalents’ of $1.1 billion, with over $48.9 million worth of US dollar-pegged stablecoin USDC (jointly maintained by Coinbase and Circle), $130 million of Bitcoin, $23 million of Ethereum, and $34 million of other cryptocurrencies.
Some risks
The firm also identified some ongoing risks that it would face, starting with the very nature of the market it was in. “Our business and an investment in our Class A common stock are subject to numerous risks and uncertainties,” the filing read, stating:
- Our operating results have and will significantly fluctuate due to the highly volatile nature of crypto.
- Our net revenue is substantially dependent on the prices of crypto assets and the volume of transactions conducted on our platform. If such price or volume declines, our business, operating results, and financial condition would be adversely affected.
- A majority of our net revenue is derived from transactions in Bitcoin and Ethereum. If demand for these crypto-assets declines and is not replaced by new crypto asset demand, our business, operating results, and financial condition could be adversely affected.
Another risk identified was that the development of cryptocurrencies was both unpredicted and difficult to accurate map. “If crypto does not grow as we expect, our business, operating results, and financial condition could be adversely affected,” Coinbase said.
7/ RISKS:
+ highly volatile results, but Coinbase depends on high volatility and rising crypto asset prices
+ dependent on BTC/ETH (because they are boxed out from broader asset support thanks to the SEC)
+ opsec, regulatory, competitive, banking risks, etc.— Ryan Selkis (@twobitidiot) February 25, 2021
With all that in mind, however, the business is geared for a mammoth direct listing on Nasdaq. The IPO has been advised by Goldman Sachs, JP Morgan, and Citibank.
Meanwhile, Bitcoin surged to over $52,000 with news of the Coinbase filing. It has since fallen back to the $51,000 level as traders took profits following last week’s market downturn.
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