HOT Crypto IPO Trend? Coinbase & MUCH MORE!!

Jan 04, 2021

📈 Coinbase Listing
About a week ago, Coinbase submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission. It was of course not a surprise given how much the exchange has grown over the past year. Despite what you think of Coinbase, there is a reason as to why these shares could be in high demand. It all comes down to the profitability of the exchange. As long as there is volume in the crypto markets, Coinbase is banking. Be buying or selling pressure, the fees roll in.

💸 Potential Coinbase Valuation
Messari Developed a model in order to value Coinbase. They run this analysis with some pretty well known financial metrics used to value companies. These are valuation multiples like price-to-sales. You can pretty much be sure that the company is going to be more valuable than it was in its most recent fundraising round. That was back in October of 2018 when they raised $308 million in their series E. That Series E raise was over 2 years ago in a really tough market environment. Two things that we know are likely to have increased include not only the revenue but also the premium investors are willing to pay on that Revenue (price to sales). So therefore, an estimate of for the range of Coinbase's valuation is between 32 billion (based a multiple of 19.9) and 19 billion (based on a ratio of 12). Messari has further honed in on this by taking a probability weighted valuation between the two ratios and we come to our grand number of $28 billion! This is just an estimate though and cannot be used as any sort of concrete. I personally happen to think that the multiple could be even higher than 17 times.

🤔 Other Stocks?
Another potential candidate has to be Bitmain as they have long had their sights on an IPO. They first looked towards a Hong Kong IPO back in 2018. That, however, seemed to fall through as the application lapsed in March of 2019. There was quite a lot of infighting that seemed to dominate the news cycle recently however this seemed to have settled at the end of the last year as the one owner bought out the other. There were reports that not long after this the one owner is considering taking the remaining Chip manufacturing business public. This could be before 2022 and could provide US crypto investors an important diversification play (although the company was most recently unprofitable).

🤓 Should you Invest?
Well of course, that all depends on the price but even then, I would be very careful about it. And this comes to a very simple reason. It is well known in the financial markets that the hottest stocks are often front and centre for all the institutional managers. Once these guys get their allocation, they dump the rest on the market which leads to a fall in the price. You should therefore cool off on the first day that the stock starts trading. There is a chance that once the hype dies down it could provide you with an opportunity to get in at a more sustainable level. This has actually happened on a number of other tech companies in the past. These include the likes of Facebook etc.