Coinbase's IPO plan postponed to April

According to a report by Bloomberg on March 21, people familiar with the matter revealed that the direct listing plan of the US cryptocurrency exchange Coinbase will be postponed to April. It was originally planned to be listed on the Nasdaq at the end of March.

It is worth mentioning that Coinbase was previously accused by the U.S. Commodity Futures Trading Commission (CFTC) of inaccurately reporting Bitcoin trading data and that an employee had forged Litecoin (LTC) trading volume and demand through “self-trading.”

The CFTC order states that between January 2015 and September 2018, Coinbase ran two automated trading programs, Hedger and Replicator. Although Coinbase disclosed the use of trading programs, they did not disclose that they were using two programs that often matched trades. This in turn led to the Coinbase API sending false trading data to platforms such as the CME Bitcoin Real Time Index, CoinMarketCap, and the NYSE Bitcoin Index through Coinbase's "direct feed".

“The reporting of false, misleading, or inaccurate trading information undermines the integrity of digital asset pricing,” said Vincent McGonagle, Acting Director of the Division of Enforcement. “This enforcement action sends a message that the CFTC will take action to protect the integrity and transparency of such information.”

In addition, the announcement also pointed out that an employee of the company washed a certain amount of LTC over a six-week period in 2016. The CFTC believes that Coinbase should be "vicariously liable" for these fraudulent transactions.

The market believes that Coinbase's listing plan was shelved because of the CFTC's allegations. However, the U.S. Commodity Futures Trading Commission announced on March 19 that it had reached a settlement with Coinbase, for which Coinbase will pay a settlement of $6.5 million.

Founded in 2012, Coinbase is one of the earliest cryptocurrency exchanges in the world and the largest cryptocurrency trading platform in the U.S. It is reported that Coinbase has compliance licenses in more than 40 states in the U.S., including BitLicense and MSB licenses, and can provide institutions and professionals with trading of crypto assets such as Bitcoin and Ethereum.

Coinbase backers registered as many as 114.9 million shares last week for trading after the listing, a move that allows investors to sell shares immediately after the listing, rather than waiting for a lock-up period that would normally last up to six months.

Regulatory documents filed Wednesday show that investment firms including Andreessen Horowitz and Union Square Ventures, as well as Coinbase Chief Executive Brian Armstrong and co-founder Fred Ehrsam, have registered to sell shares.

Coinbase’s latest financial statements show that, unlike many startups when they went public, Coinbase is now profitable. The financial report shows that Coinbase turned from a loss to a profit of $322 million last year, and its net income more than doubled to $1.14 billion.

In addition, documents disclosed by the U.S. SEC show that as of December 31, 2020, Coinbase had 21,035,491 Class A common shares issued and 164,950,620 Class B common shares issued, plus 114,850,769 Class A common shares to be publicly issued, totaling 300,836,880 (over 300 million) shares. If calculated based on the weighted trading price of Class A shares in private transactions in the first quarter of US$343.58, Coinbase's market value in the private trading market is close to US$115.7 billion. In other words, Coinbase's initial valuation upon listing exceeded that of other U.S. technology companies except Facebook.

In this regard, David Trainer, CEO of stock research firm New Constructs, said that Coinbase's current valuation of $100 billion is too high. He believes that as competition in the cryptocurrency market intensifies, Coinbase's current market share and its profit margins may not be sustainable, and Coinbase's current valuation may be based on market sentiment rather than fundamental analysis.

Thomas Meyer, head of marketing at Cove Markets, also said that Coinbase is not worth $100 billion. He believes that although Coinbase is likely to be successfully listed and successful, investors should be aware of the risks. Some of these potential risks include over-reliance on transaction fees, fierce competition from other exchanges and investment platforms, and the threat of DeFi.