Coinbase’s Direct Listing: What Investors Need to Know

Coinbase Goes Public

In a move that has heads turning in the investment community, Coinbase is gearing up for a direct listing on U.S. stock exchanges. It’s a big deal, and they’ve submitted an S-1 report that spills all the juicy details investors need to know while clutching their accountant-approved calculators.

The Numbers Game

Let’s get to the good stuff — money. Coinbase reported an eye-popping revenue of $1.1 billion in 2020, skyrocketing from $482 million in 2019. Almost all—96% to be exact—of this cash flow comes from transaction fees, which begs the question: Are users paying up for all those crypto cat videos? The rest of the revenue comes from subscription services, and a smug $136 million from over-the-counter trades.

Operating Expenses: A Pain Point

But wait, the cash register isn’t ringing quite as loudly when you consider operating expenses. In 2020, these costs soared to over $880 million, thanks to research and development, general administrative expenses, and the pesky transaction expenses. Those transaction costs include everything from blockchain miner fees to reversal costs, making you appreciate that no transaction is without its hiccups.

Yearly Contrasts: From Loss to Profit

Just a year prior, in 2019, Coinbase experienced a loss of $46 million. They raked in $533 million but couldn’t keep pace with their $579 million operating expenses. Fast forward to 2020, and they turned the tables with a net income of $327 million—talk about a comeback! It seems they cracked the code on crypto trading just in time.

The Rise of Institutional Investors

2020 also saw a notable shift, with institutional trading marking the bulk of Coinbase’s trading volume, while retail investors made a frenetic comeback in Q4. Was it all that holiday spirit, or did they finally figure out how to buy crypto without having to ask Grandma for help?

The Ownership Puzzle

Diving into the ownership structure reveals some interesting dynamics. CEO Brian Armstrong holds just 11% of the company, though one might argue that governance power comes with a fancier costume known as Class B shares. Meanwhile, Marc Andreessen, co-founder of venture capital firm a16z, has his fingers in 24.6% of all Class A shares. It’s a classic case of the saying, “you can’t take it with you, but you can take all the shares you want!”>

Who’s in Charge?

Even with his relatively small stake, Armstrong isn’t at risk of being booted out anytime soon, thanks to his extra Class B shares. The executives and board of directors collectively own a hefty 53% of Class A shares and 54% of Class B shares, making them the undisputed rulers of the Coinbase kingdom. So wake up, Brian, and get ready for your close-up at the next board meeting!

Final Thoughts

As Coinbase prepares to strut its stuff on the stock market stage, investors should keep a close eye on this remarkable shift. With its significant revenue growth, a cleaned-up balance sheet, and a strong backing from influential giants, Coinbase is poised to become a household name for both seasoned investors and those still figuring out what cryptocurrency actually is. In the crypto world, anything can happen—so hold onto your hats!