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The Coinbase IPO: What You Need to Know | COIN Direct Listing - YouTube
Channel: Healthy, Wealthy, and Wise
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bitcoin ethereum it's all a big right now but to聽
get into it you need a cryptocurrency exchange聽聽
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which leads us to today where we're talking聽
about coinbase one of the earliest crypto聽聽
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exchanges and one that just happens to be going聽
public this month if you want to see if investing聽聽
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in a coinbase ipo or more accurately a coinbase聽
direct listing makes sense for you stay tuned
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welcome to healthy wealthy and wise where we talk聽
all things that can improve our financial wellness聽聽
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whether it's looking to invest in the next big聽
company or by just doing those little smart聽聽
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everyday things that we can do to build wealth and聽
financial independence as always i want to thank聽聽
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all of you in the community for checking in and聽
always supporting the channel by being generous聽聽
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with the like button sharing your thoughts in the聽
comments and even sharing the videos with your聽聽
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friends and for anyone new here my name is kevin聽
and i want to welcome you here for the first time聽聽
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definitely check out the video and if you聽
end up liking it consider this your formal聽聽
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invitation to join the community after all聽
it's totally free and by subscribing you'll聽聽
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make sure you don't miss any upcoming videos聽
so coinbase we've talked about them as one聽聽
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of the biggest ipos expected for the year and聽
we started talking about them back in december聽聽
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and when you look at what the crypto has done聽
over the past year the timing makes complete sense聽聽
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now originally we expected the direct listing聽
to happen last month there was a slight delay聽聽
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which ended up being a good thing because now we聽
have more information on the recent performance聽聽
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of the company which i'll tell you about as we聽
work through our discussion so let's dig into the聽聽
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filing and go over the background and financials聽
of the company before we talk about the coinbase聽聽
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direct listing itself and then we'll talk some聽
valuations and considerations of the company聽聽
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so coinbase was founded in 2012 as an exchange for聽
bitcoin so not a brand new company at all now one聽聽
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of the things i've heard on previous videos where聽
i've talked about coinbase is a decent amount聽聽
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of complaints on coinbase as far as customer聽
service and issues with the platform and website聽聽
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now if you've personally had positive聽
or negative experiences with them聽聽
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definitely love to hear about them in聽
the comments so according to coinbase聽聽
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they've grown to now directly integrate with over聽
15 blockchain protocols support over 90 crypto聽聽
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assets for trading or custody and offer a suite of聽
subscriptions products and services and they have聽聽
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43 million verified users 7 000 institutions and聽
115 000 ecosystem partners in over 100 countries聽聽
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that participate in the crypto economy around聽
the world along with verified users another聽聽
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major key performance indicator or metric is mtus聽
or what that stands for monthly transacting users聽聽
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for 2020 that was 2.8 million and we'll聽
discuss where that number could go in 2021.聽聽
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now coinbase initially and still does make most of聽
their money by charging trading fees now most of聽聽
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that total revenue from the transaction freeze on聽
the platform comes with connection of the purchase聽聽
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the sale and the trading of crypto assets by聽
the customers transaction revenue is based on聽聽
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transaction fees that are either a flat fee or聽
a percentage of the value of each transaction聽聽
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for retail brokerage products coinbase also聽
charges the spread to ensure that they are able to聽聽
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settle purchases and sales with the price quoted聽
to their customers another growing part of their聽聽
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business is in custody operations which involve聽
charging clients to safely store large amounts of聽聽
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crypto now right now this is not a significant聽
amount of the revenue but when you hear media聽聽
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stories about people losing their passwords and聽
basically forfeiting millions of dollars there聽聽
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seems to be some potential value in exploring聽
some growth in this area now taking a look at聽聽
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the financials from their filing as of december聽
31 2020 customers have traded over 456 billion聽聽
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on the platform since coinbase's inception and聽
has stored over 90 billion dollars worth of assets聽聽
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across their platform for the year ended december聽
31 2020 uh coinbase generated total revenue of 1.3聽聽
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billion dollars which is up from 533.7 million in聽
2019 and then also for the year 2020 transaction聽聽
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revenue represented over 96 percent of their total聽
revenue which again supports what we just said now聽聽
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as far as profitability coinbase reported a聽
net income of 322.3 million dollars in 2020聽聽
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which is up from a net loss of over 30.4 million聽
dollars in 2019. and then just from some other聽聽
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information that they shared in the filing they聽
reported that their overall market capitalization聽聽
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of crypto assets grew from less than 500 million聽
dollars in 2012 to up to 782 billion dollars聽聽
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by december 31st 2020 which represented a聽
compound annual growth rate of over 150 percent聽聽
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now because there was a slight delay in the聽
listing of coinbase stock we did get some聽聽
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more recent information on their financials so for聽
the first three months of 2021 ending march 31st聽聽
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which is newer than the data that was reported in聽
the rest one filing so coinbase just released this聽聽
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information and again these are all estimates聽
but as of right now coinbase is estimating that聽聽
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they have 56 million users as of march 31st they聽
had monthly transacting users or again mtus of聽聽
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6.1 million which is more than double the average聽
of all of 2020. they also reported assets on the聽聽
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platform of 223 billion dollars representing聽
11.3 percent of the crypto asset market share聽聽
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and that includes 122 billion dollars of聽
assets on the platform from institutions聽聽
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they had trading volume of 335 billion dollars in聽
total revenue of approximately 1.8 billion dollars聽聽
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with net income coming in approximately 730聽
million dollars to 800 million dollars they聽聽
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also reported adjusted ebitda of approximately 1.1聽
billion dollars now they also offered an outlook聽聽
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for all of 2021 which we'll get to in a minute but聽
first let's take a quick look at the competition聽聽
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while coinbase is among the leading online聽
cryptocurrency platforms worldwide there are聽聽
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some other names as you might have heard of some聽
of those include binance kraken etoro and gemini聽聽
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and then as coinbase states in their filing聽
they also believe other fintech and brokerage聽聽
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companies such as square robinhood and paypal聽
are competitors as well now when a company first聽聽
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starts to trade on the public markets everybody聽
will call it an ipo in this case a lot of people聽聽
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are talking about a coinbase ipo but it's聽
technically not an ipo it's a direct listing聽聽
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now if you're unsure what a direct listing is聽
i did make a full video on what they are all聽聽
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the details of them how they're different than an聽
ipo which i put out right before roblox had their聽聽
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direct listing so if you haven't seen that i'll聽
link it for you in the description now because聽聽
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it is a direct listing and not an ipo there is聽
no ipo price and as of this recording we don't聽聽
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have a reference price out just yet but i'll try聽
to estimate what that could be for you in a minute聽聽
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now what we do know though is that the聽
coinbase stock is set to start trading on聽聽
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the public markets on wednesday april 14th聽
and it'll trade under the ticker c-o-i-n聽聽
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now let's go over some of the considerations of聽
investing in the company first of all i know many聽聽
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of you will feel that crypto is risky and there's聽
no question there's a lot of volatility in it but聽聽
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the question might be is how's the volatility of聽
crypto in general impact the crypto exchange like聽聽
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coinbase where they make money by the transaction聽
fee versus the underlying value of what bitcoin聽聽
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ethereum or any other cryptocurrency is now a聽
major factor to consider is that the total revenue聽聽
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is substantially dependent on the prices of crypto聽
assets and volume of transactions produced on the聽聽
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platform now the reality is is that transaction聽
revenue is the driver of their business聽聽
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so when you look at how their transaction fee is聽
based is that it's either the greater of either聽聽
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a flat fee or percentage of the value of each聽
transaction and the flat fee is really dependent聽聽
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on how much of the value is of the currency you're聽
buying so if that price goes down you may choose聽聽
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and you're buying the same amount of volume of聽
the crypto asset the price is going to drive聽聽
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down the transaction fee so while a flat fee might聽
provide some insulation to revenue declines if the聽聽
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underlying cryptocurrency value drops the flat聽
fee itself is tied to how much the transaction聽聽
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costs and lowers the value which will likely lead聽
to people buying less i mean we see that all the聽聽
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time that even though we have the mantra buy聽
low and sell high when an issue or commodity is聽聽
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dropping a lot of people don't have the summit for聽
buying more when the price is down now with crypto聽聽
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being still a relatively new asset um we have we聽
can see that there's historically been a lot of聽聽
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volatility there and then for instance in 2017 the聽
value of certain crypto assets including bitcoin聽聽
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experienced a lot of increases in value which did聽
result in their customer base expanding however聽聽
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that increase was followed by a steep decline in聽
2018 which coinbase said adversely affected their聽聽
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revenue and operating results so as you're looking聽
at coinbase it has this history of cycles and聽聽
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we also know it's a new asset so we聽
don't have decades of history to look at聽聽
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we basically have a decade and we do know聽
that people will pay in excel when prices drop聽聽
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and we're still trying to figure out what the聽
widespread adoption will be with crypto in general聽聽
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so right from coinbase themselves which is聽
basically what we're saying is that the price聽聽
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and the trading volume of any crypto asset is聽
subject to significant uncertainty and volatility聽聽
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and those can depend on a number of factors聽
including changes in liquidity market making聽聽
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volume and trading activities trading activities聽
on other crypto platforms worldwide so again聽聽
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there could be that race for lower fees which聽
could be good for the customer not so good for聽聽
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coinbase investment and trading activities聽
of highly active retail and institutional聽聽
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users speculators miners and investors and聽
the speed rate of which crypto is able to gain聽聽
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adoption as a medium of exchange utilities store聽
of value consumptive asset security instrument or聽聽
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other security assets worldwide now another risk聽
could be regulations and again we're hearing more聽聽
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about the potential but as of right now it's聽
uncertain to what form it could take so you聽聽
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just have to sort of know it's out there but as聽
of right now we don't know what that's going to聽聽
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look like and again that can vary from country聽
to country okay before we talk about coinbase's聽聽
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outlook in a discussion of the valuation and聽
potential reference price of the coinbase stock聽聽
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i just wanted to check in for a quick聽
second to see if you're enjoying the video聽聽
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and if you are i just want to ask you to please聽
give a tap to that like button if you haven't聽聽
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already done it it's really important for聽
me to know that you like videos like this聽聽
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obviously i want to make videos on the things聽
you want to see and the like button is an easy聽聽
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way for me to figure that out so thank you all聽
right let's look at coinbase's outlook for 2021聽聽
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and this comes right from coinbase themselves聽
now remember we said that 2020 mtu's or monthly聽聽
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transacting users came in at 2.8 million and for聽
the first quarter of 2021 it came in at 6.1 users聽聽
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now coinbase came up with three possible聽
scenarios for the annual average mtu so their most聽聽
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optimistic scenario has them coming in at seven聽
million mtus for all of 2021. this number assumes聽聽
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an increase in crypto market capitalization and聽
moderate to high crypto asset price volatility聽聽
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now in this optimistic scenario they expect the聽
mtus will continue to grow for the remainder of聽聽
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2021. now their middle range estimate is that聽
they come in at 5.5 million mtus now this聽聽
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scenario seems flat crypto market capitalization聽
and low to moderate crypto asset price volatility聽聽
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this scenario assumes a modest decline in mtus聽
from quarter one in 2021 now on the low side or聽聽
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the most pessimistic outlook would be that they聽
come in an average mtu of 4 million according to聽聽
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coinbase this scenario assumes a significant聽
decrease in crypto market capitalization聽聽
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similar to the decrease observed in 2018 and聽
low levels of crypto asset price volatility聽聽
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in this scenario coinbase is assuming that mtus聽
will decrease in a corresponding manner and end聽聽
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2021 at similar levels to the quarter 4 of 2020.聽
they also talked a little bit about institutional聽聽
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revenue where coinbase does expect meaningful聽
growth in 2021 they feel that will be driven by聽聽
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transaction and custody revenue given the聽
increased institutional interest in the聽聽
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crypto asset class however they do say that their聽
institutional revenue has been very unpredictable聽聽
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all right so now let's talk about coinbase聽
and their evaluation as we head into the聽聽
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direct listing and talk about what a potential聽
reference price of coinbase stock could be聽聽
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now what coinbase did was they did聽
list the most recent transaction prices聽聽
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on the private market in their s1 filing and those聽
were all from the first quarter of 2021 which was聽聽
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really through march 15th now the shares traded on聽
the private market at around 200 on the low side聽聽
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up to as high as 375 dollars on the high side as聽
far as the volume weighted average price per share聽聽
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for the first quarter of 2021 again through march聽
15th then that price was 343 dollars and 58 cents聽聽
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now that would probably be a good estimate聽
of what the reference price could come in at聽聽
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we've seen just recently with roblox that that's聽
how they figured out their reference price so i聽聽
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would expect coinbase to do something similar now聽
there's no guarantee it'll be that exact number聽聽
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and for what it's worth the reference price聽
doesn't mean that's where the stock will open聽聽
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but just gives you an idea of you know where聽
it could open the stock could still come out聽聽
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trading a lot hotter it could it could come out聽
trading lower it's just really going to be what聽聽
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the demand is however when you consider that the聽
higher end of the range was at 375 dollars and now聽聽
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we have even better numbers that have just come聽
out for the first quarter i would expect that this聽聽
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stock will probably trade much higher than that聽
343 dollar number now as to looking at valuation聽聽
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let's again say that the stock hypothetically聽
trades at 343.58 if the coinbase stock was to聽聽
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trade at that number the company would be valued聽
close to around 90 billion dollars now to put聽聽
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things in perspective the company was last valued聽
at eight billion dollars in october of 2018.聽聽
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and then in the third quarter of 2020 coinbase's聽
stock actually traded for an average of just under聽聽
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29 on the private markets so i think i mentioned聽
before that coinbase going public now makes sense聽聽
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because timing really is everything so what do聽
you guys think are you buying coinbase stock聽聽
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let me know in the comments i hope you enjoyed the聽
video and if you did again please press that like聽聽
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social media sites and forums you're on anything聽聽
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you can do to help me grow the channel will allow聽
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you're new to the channel or just an occasional聽
visitor we'd love to have you join the community聽聽
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we'd love to have you on board until next time聽
thank you for watching and have a great day
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