The decision by ICE to offload its stake was strategic and came at a time when Coinbase reported Q1 revenue of $1.8 billion amid the ongoing crypto market boom.
Intercontinental Exchange Inc (NYSE: ICE), the owner of the New York Stock Exchange has revealed it has sold its stake in the recently listed cryptocurrency exchange Coinbase Global Inc (NASDAQ: COIN). As revealed in the company’s earnings call on Thursday, Chief Financial Officer, Scott Hill said the company’s 1.4% stake was sold off for $1.2 billion in gross proceeds.
The Intercontinental Exchange is one of the early investors in Coinbase and is now coming off as one of the biggest beneficiaries when the trading platform debuted on the Nasdaq a few weeks ago. As noted by Scott, the selling of the stake generated a net profit of $900 after taxes. This fund is billed to be used to reduce the company’s debt position at the end of the First Quarter.
The ICE executive also said the company’s pro forma leverage, or total indebtedness rate, would have been closer to 3.6x compared to 4.2x when ICE acquired Ellie Mae, a mortgage-focused software company at the end of the third quarter of 2020.
Intercontinental Exchange has been paying down its debt even before the Coinbase stake was sold out according to incoming CFO Warren Gardiner. He submitted that the revenue generated from the Coinbase sales offered additional flexibility for the company as it seeks to navigate the rest of the 2021 fiscal year.
“We are down to about 3.6 leverage, the target is about 3.25, where we can start to think about buying back stock,” he noted.
Per the company’s performance in the market, investors appear to be wary of the Coinbase sell-offs with ICE shares closing 1.17% to $117.68 on Thursday.
Best Time for Intercontinental Exchange to Ditch Coinbase?
Coinbase made its public debut with its shares trading at $381 each. The first trading day pushed the price back down to a close of $328.28 per share, and a market cap of $85.5 billion. At this valuation, Coinbase had a bigger valuation than the Intercontinental Exchange. It ranked as the most valuable exchange in the United States.
The decision by ICE to offload its stake was strategic and came at a time when Coinbase reported Q1 revenue of $1.8 billion amid the ongoing crypto market boom. The digital currency exchange’s share price is fast retracing, closing yesterday’s session with a price valuation of $294.77 per share.
Coinbase stock is tied closely to the potential growth or performance in the global cryptocurrency industry featuring Bitcoin (BTC) and Ethereum (ETH). Should the upward trajectory being reported since the turn of the year continue, with a corresponding impact on the share price of Coinbase, the Intercontinental Exchange may have to pay much more for the shares they lost whenever the buyback move is made.
This loss may be cushioned as ICE-owned trading platform Bakkt is also billed to go public through a merger with Victory Park SPAC.
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