Coinbase To Go Public With $100 Billion Valuation, No Address

Coinbase To Go Public With $100 Billion Valuation, No Address

Coinbase is going public in a direct listing. And why wouldn’t it?

I’m a simple man (in some ways), so I view the crypto world with trepidation. To the extent I acknowledge its possibilities, it’s from a historical, sociological perspective.

Last week, for instance, I spent some time reviewing what, exactly, money really is. The point was to say that while I’m not personally inclined to own any Bitcoin (let alone any other cryptocurrencies), at the most basic level, there’s nothing that’s any less “real” about them than the dollar or the euro or the yen.

Money is based on giant networks of trust. Without trust, most forms of money are worthless, and the ones that aren’t don’t work very well. Ancient barley money had some inherent value, for example, but its capacity to facilitate transactions efficiently was severely limited.

Read more: How Bitcoin Can Replace The Dollar

That’s what’s interesting about Bitcoin’s most recent surge. It’s been driven, in part anyway, by increased adoption. And what does increased adoption actually mean? Well, it means more people are beginning to trust it.

From Mastercard, to BNY Mellon, to Square, to Tesla, to [fill in the blank with your favorite super-adopter], Bitcoin is gathering adherents. Last week, its market value topped $1 trillion.

Note that when I say “collectively imagine” in the chart, I’m not necessarily trying to be derisive. Bitcoin, unlike, say, gasoline or corn, has no actual value, just like dollars have no actual value unless you’re cold and you have a lot of them plus the capacity to set them ablaze.

Coinbase’s filing is predictably silly. There’s a reference to Satoshi Nakamoto and the company notes that it has no headquarters, and thus no address for its principal executive offices, although it does “currently lease” a variety of facilities across a number of locales “for purposes of collaboration and team building.” That, even as the filing suggests there’s not much physical “collaboration and team building” going on right now, due to COVID.

“Our telephone number is (415) 843-1515,” Coinbase helpfully notes.

While the company may lack traditional corporate trappings, it does have revenue and, notably, profits. Coinbase made $322 million last year on revenue of $1.14 billion. That latter figure doubled (and then some) from 2019.

Again: At least it’s profitable. That’s more than you can say for a lot of public companies, especially following the pandemic.

Some of the statements in the filing will either seem amusingly quaint in a future dominated by crypto or else totally ridiculous. I don’t pretend to know which.

“We enable customers around the world to store their savings in a wide range of crypto assets… and to instantly transfer value globally with the tap of a finger on a smartphone,” the filing reads.

“Value” being the key word there. It’s still not clear if there is, in fact, any value in crypto.

The company also says it “invest[s] heavily in regulatory compliance by working with regulators around the world to shape policy.” They’ll need to do more of that, because as Janet Yellen made clear earlier this week, the establishment isn’t convinced.

According to Axios, Coinbase was valued at $100 billion in a recent private share sale. Over nearly a decade, Coinbase has raised in excess of a half-billion dollars. The company lists a veritable who’s who of the VC world as shareholders, including Andreessen Horowitz and Union Square.

As Bloomberg noted, Coinbase’s offering “could be the first major direct listing to take place on the Nasdaq. All previous ones, including Spotify, Slack, Asana, and Palantir, were listed on the NYSE.”

Coinbase provides a handy, bullet point list of crypto risk factors. To be sure, the list of risks for any business is theoretically infinite. It’s impossible for a company filing to enumerate the entire universe of risks. So, in that respect, Coinbase is no different from anyone else.

However, some of the following statements (from the filing) would make me exceptionally nervous. You can read them for yourself below (the italics are mine):

  • 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 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.
  • The future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate. If crypto does not grow as we expect, our business, operating results, and financial condition could be adversely affected.
  • Cyberattacks and security breaches of our platform, or those impacting our customers or third parties, could adversely impact our brand and reputation and our business, operating results, and financial condition.
  • We are subject to an extensive and highly-evolving regulatory landscape and any adverse changes to, or our failure to comply with, any laws and regulations could adversely affect our brand, reputation, business, operating results, and financial condition.
  • We operate in a highly competitive industry and we compete against unregulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition may be adversely affected if we are unable to respond to our competitors effectively.
  • We compete against a growing number of decentralized and noncustodial platforms and our business may be adversely affected if we fail to compete effectively against them.
  • As we continue to expand and localize our international activities, our obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions will increase and we may be subject to investigations and enforcement actions by regulators and governmental authorities.
  • We are and may continue to be subject to material litigation, including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities, which may adversely affect our business, operating results, and financial condition.
  • If we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services and, consequently, our revenue could decline, and our business, operating results, and financial condition could be adversely impacted.
  • A particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, and our business, operating results, and financial condition may be adversely affected.
  • We currently rely on third-party service providers for certain aspects of our operations, and any interruptions in services provided by these third parties may impair our ability to support our customers.
  • Loss of a critical banking or insurance relationship could adversely impact our business, operating results, and financial condition.
  • Any significant disruption in our products and services, in our information technology systems, or in any of the blockchain networks we support, could result in a loss of customers or funds and adversely impact our brand and reputation and business, operating results, and financial condition.
  • Our failure to safeguard and manage our customers’ fiat currencies and crypto assets could adversely impact our business, operating results and financial condition.
  • The loss or destruction of private keys required to access any crypto asset held in custody for our own account or for our customers may be irreversible. If we are unable to access our private keys or if we experience a hack or other data loss relating to our ability to access any crypto assets, it could cause regulatory scrutiny, reputational harm, and other losses.
  • The registration and listing of our Class A common stock differs significantly from an underwritten initial public offering.
  • The price of our Class A common stock may be volatile, and could, upon listing on the Nasdaq Global Select Market, decline significantly and rapidly. Market volatility may affect the value of an investment in our Class A common stock and could subject us to litigation.
  • The dual class structure of our common stock will have the effect of concentrating voting control with those stockholders, including our directors, executive officers, and their respective affiliates, who held in the aggregate % of the voting power of our capital stock upon the effectiveness of the registration statement of which this prospectus forms a part. This ownership will limit or preclude your ability to influence corporate matters, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.
  • None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, the sales or distribution of substantial amounts of our Class A common stock, or the perception that such sales or distributions might occur, could cause the market price of our Class A common stock to decline.


11 thoughts on “Coinbase To Go Public With $100 Billion Valuation, No Address

  1. I just took the 10 minutes to read through an Amazon S-1 filing from May 1997 on I read the risk factors section. Amazing.

    Seems any longer that there ends up being one winner in new spaces. Many super smart people have commented on this. Think about the company that ends up being the first to make a dense-enough battery, at the right price, that it is widely adopted by EV manufacturers. Priceless and unassailable into the foreseeable future.

    Coinbase may or may not be that winner in the space they are in. But, they are in the race to be that winner.

    Incidentally, and not at all related to the topic of this article, there is this statement in the Amazon S-1 re their dividend policy:
    The Company has never declared or paid any cash dividends on its capital
    stock. The Company currently intends to retain any future earnings of its
    business, and therefore does not anticipate paying any cash dividends in the
    foreseeable future.

  2. This quote is in order:

    A new scientific (cryptocurrency) truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die and a new generation grows up that is familiar with it. . . . An important scientific (cryptocurrency) innovation rarely makes its way by gradually winning over and converting its opponents: it rarely happens that Saul becomes Paul. What does happen is that its opponents gradually die out, and that the growing generation is familiarized with the ideas from the beginning: another instance of the fact that the future lies with the youth.

    —?Max Planck, Scientific autobiography, 1950, p. 33, 97
    Informally, this is often paraphrased as “Science ( (cryptocurrency)) progresses one funeral at a time”

    1. You’re saying cryptocurrencies are what Max Planck refers to as “scientific truths”, like how the Earth revolves around the Sun and matter is energy.

      Putting the word “cryptocurrencies” in the quote of a great physicist doesn’t make Bitcoin and Tether less scammy.

      1. ML,

        I’m just implying that younger people who invested in the Ford tech craze, back around 1900 ended up with greater future value, than the generation that was enamored by buggy whips, horse shoes, saddles, spittoons, wagon wheels and a long list of great technologies from that era. There’s also a tsunami of Baby Boom investors that are in love with dividend stocks, low P/E ratios, REITs, shopping malls and cool stuff from the 60’s — but, as with buggy whips, investments progress, one funeral at a time.

        1. That analogy to generational trends wasn’t clear, to me at least, from the quote.

          Blockchain as the future way to track gift card (wallet) balances (Bitcoins) is far from being a scientific truth whose mass adoption only depends on the death of the older generations.

          I wonder how the tulip traders of the past convinced others of the prospect of even higher prices for the flowers in the future.

  3. Paying 51K to buy a portion of an algorithm located in a server somewhere, tethered to a plug connected to a power grid, confounds me. At the very worst, I will get back 50 cents on my US dollar…..who will reimburse me when my crypto vanishes.

  4. They should have put this at the top of the risks: they’ll sell their stock to baghodlers [intentional misspelling] as soon as they have a chance.

    “None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, the sales or distribution of substantial amounts of our Class A common stock, or the perception that such sales or distributions might occur, could cause the market price of our Class A common stock to decline.”

  5. 2001 Tech bubble crashed because every Tom Dick and Harry was IPOing and coming to market. Case of supply overwhelming the demand.

    So will be the case with all these cryptocurrencies – I lost count as to how many are trying to get a piece of the action….we may be at a tipping point of too much supply and not enough demand for crypto. Not sure if network effect works for bitcoin, if it doesn’t, pick your flavour, its like religion, they are all fundamentally wrong despite their strong beliefs.

    What may emerge from the ashes is some version of block chain technology officially sanctioned by the government, accepted as payment by the IRS and supported by banks and financial institutions. But first we need more energy efficient computers to compute the block chain lest we bump into the ESG crowd and they nix it in favor of low carbon natural money like Rai stones.

    1. Banks already keep track of transactions and people’s balances securely. It’s hard to imagine a State would wish to issue a currency whose transfer is hard to trace. The main value added from distributed transaction records is that no one has the full picture; that serves to, sure, prevent the system from going offline due to a local calamity, but also makes enforcement of transaction restrictions impossible.

      It’ll just solidify as the mode of wealth transfer of criminals (tax dodgers and organized crime).

      1. This claim has been debunked countless times but, like gold bugs with hyperinflation, it just won’t die. . That’s in 2016

        Unlike cash, which is completely traceless and anonymous, blockchain technology is pseudo-anonymous and behaves like an infinite, immutable, data ledger that houses every single cryptocurrency transaction ever made — but it also lets law enforcement agents trace and follow the money.

        So, lesson clear? If you want to sell drugs or blackmail someone, ask for dollars, the paper based types. Otherwise, you’re uselessly putting yourself at risk.

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