Ahead of the direct listing of Coinbase stock tomorrow, this article profiles some basic things to consider before buying COIN shares.
Tomorrow April 14th, American centralized cryptocurrency exchange Coinbase is set to make its public debut on the Nasdaq Global Select Market through a direct listing of its stock. The moment is highly anticipated by both cryptocurrency enthusiasts as well as investors in the broader stock market.
The availability of Coinbase (COIN) stock on the Nasdaq exchange will provide access for the more conservative investors to gain some exposure to the digital currency space. However, plans to purchase the stock should be accompanied by the knowledge of the company, and its mode of public appearance.
Coinbase Will List Without Any Underwriter
As noted, the direct listing mode of entry approved by the SEC implies that Coinbase will not be using any Underwriter, or third-party investment managers to assist with its listing process. Underwriters help assume the risks on behalf of the company, but for a fee, and the exchange is bypassing this bureaucracy to let investors have a direct opportunity to buy the stock when it is listed.
“With a direct listing, no retail brokerage firms have any role in that listing before it’s available on an exchange,” a spokesperson for financial service provider Fidelity told Cointelegraph. “The first time any retail investor has access to a stock that comes on an exchange through a direct listing is when it’s available to everyone, just like existing stocks, such as AAPL, FB, and MSFT.”
Direct listing mode of entry in the public market is becoming popular, and other outfits that have explored this channel include Spotify Technology SA (NYSE: SPOT), and Slack Technologies Inc (NYSE: WORK) amongst others.
Core Questions to Answer before Buying Coinbase Shares
Coinbase is a highly profitable company going by its $1.8 billion Q1 2021 revenue figures as reported earlier. While the firm has earmarked about 114.9 million shares for the direct listing, its filings with the SEC revealed that the shares have been trading at a weighted average price of $343.58 during the first quarter of 2021 (through March 15). With this figure, the company could raise as much as $39 billion via the direct listing exercise.
Although the prospects of Coinbase appear enticing, the stock may not be good for everyone, especially those who do not believe in the prospects of digital currencies. One of the core questions to ask is, Do I think cryptocurrencies are the future of money? This question is particularly important as Coinbase’s business revolves around the continuous growth of the crypto space. Should the digital currency ecosystem lose its luster per unfavorable regulations, Coinbase may be affected.
For those who have faith in the future of crypto, it is also important to do a fundamental analysis on Coinbase as a company and its role to continually gain a fair market share. As the entire cryptocurrency industry develops, bigger competition is bound to spring forth, and Coinbase’s ability to stand firm is key to its future success.
Though the cryptocurrency industry is seeing the best of its days at this time with Bitcoin price surging to an ATH above $62,000. Investing in the space, as well as in Coinbase may take time for the investment to attain maturity, and investors need to keep this in mind.
Pre-exposure to Coinbase Stock
The FTX cryptocurrency derivatives exchange has launched a product wherein users can trade on the price action of Coinbase stock, an offering that can offer the needed exposure to the shares ahead of the direct listing.
The exchange noted the product dubbed Coinbase (CBSE) is a pre-IPO product and that “It tracks Coinbase’s market cap divided by 250,000,000. CBSE balances will convert into the equivalent amount of Coinbase Fractional Stock tokens at the end of Coinbase’s first public trading day. In the event that Coinbase does not publicly list by June 1, 2022, CBSE balances will cash-expire to $32, in line with an 8 billion dollar valuation.”
These tokenized stocks are backed by the underlying Coinbase shares and model the real-life trading of the asset. The main stock will trade under the ticker symbol “COIN.”