Coinbase files to go public via direct listing on Nasdaq

Cryptocurrency exchange Coinbase filed to go public via direct listing on the Nasdaq under the symbol “COIN,” according to its SEC filing. The company’s financials showed it had 2020 income of $322 million, compared to a loss of $30 million a year earlier, with a net revenue of $1.14 billion verses $482.9 million year-over-year.

Video Transcript

MYLES UDLAND: We mentioned coins, so let's move now to another big story this morning. That is Coinbase filing its S-1 to go public via direct listing on the NASDAQ. Some of the highlights you mentioned right at the top. $1.28 billion in revenue in fiscal 2020. The company is profitable. They have 43 million verified users. A very interesting read, here. On an expected filing from the company. But interesting, you know, Julie, to see a company with $322 million in net income in the most recent fiscal year coming public.

And I was thinking this morning, you know, we have all these SPACs. And the SPACs are allowed to make all these wild, forward-looking projections because they have different rules. Now Coinbase can't do that in their S-1. This is actually a company I would like to hear about their four and five year plan. I mean, I know the financials are good, you know, looking back for them. But I want to know what Brian Armstrong is thinking for the next five years. I don't really want to know what pre-revenue SPAC du jour is thinking for the next five years. But, you know, such as the world does as the SEC has given it to us.

JULIE HYMAN: When the cornerstone of your business are extremely volatile assets, how do you, then, project? I mean, he's got to have a target, right, for Bitcoin say and the implications for his business if it goes up. I believe Coinbase, Myles, don't they also hold Bitcoin themselves? They don't just, of course, a lot of the trading of it, but isn't there-- I thought I saw something this morning that in the filing, they also talk about holding Bitcoin?

MYLES UDLAND: Well, they have custody for their customers. So they have about $90 billion of that. But I don't know if those-- I guess you're saying like a MicroStrategy type situation--

JULIE HYMAN: Right.

MYLES UDLAND: --where they have some of their capital on the balance sheet? That I do not know based on my cursory read of the filing I've done so far.

JULIE HYMAN: Yeah, we're going to have to keep digging through here. But I mean, you know, what's also interesting implied in the fact that they're during the direct listing, right, is that they don't need to raise capital. And rather that insiders want to cash out of the holding that they have in the company, which is also sort of an interesting layer on this.

And even though-- and also, that they issued a SPAC, for example. Right? That, you know, these companies that want to come public right now, have this suite of three options that they can take advantage of in the market right now. And so it's kind of interesting that they chose this particular path at this particular time. At a time when, you know, they could have maybe gained a little more capital in different ways for the business itself. So that implies they feel they don't need it.

BRIAN SOZZI: Guys, what I'm interested in here too is, when Coinbase does, in fact, come to market, do you see-- or even before they do, do you see a rotation out of Square and out of PayPal? Because for the most part, outside of investing, let's say, in Oracle or Bitcoin itself or another crypto, you have not really had a pure play investment to play the trading in the frenzied activity we often see in cryptocurrency. If you own shares in Coinbase, do you also need to own shares and Square and PayPal? You know, it's going to be an interesting dynamic, I think.

MYLES UDLAND: Yeah. And so, you know, just to go back-- and I think-- and, Sozz, that raises the question too of how-- you know, what does each of these companies serve-- you know, where do they fit within this Bitcoin derivative play, which I think a lot of people are interested in rather than owning the asset itself.

And, Julie, just to your question, Bitcoin-- or sorry, Coinbase in here, they say that through their history, 96% of their net revenue has been generated from transaction revenue. I take that to mean, they are not holding Bitcoin and marking those returns up on their balance sheet or on their income statement as revenue. So I see them as being a market maker in Bitcoin. They are in cryptocurrency. They kind of are what they say they are. They run a trading platform, and they have wallet storage, and that's how they make their money. They're not buying tons of crypto and then saying, oh, now we're worth x because the crypto went up, which is an interesting dichotomy when you compare it to what we've seen in some other of those businesses.