Cryptocurrency exchange Coinbase Global Inc on Wednesday made a dramatic stock market debut amid frenzied interest in bitcoin and other virtual currencies, despite concerns about a bubble.
The enterprise, the first company devoted entirely to cryptocurrency to list on a US stock exchange, debuted on the NASDAQ Composite at US$381 per share, 52 percent above its reference price, and rose as high as US$429.54 before finishing the day at US$328.28.
The company ended the day with a market value of about US$86 billion, after topping US$100 billion earlier in the session.
Photo: Bloomberg
Coinbase chose a direct listing, which does not allow it to raise new funds, but does offer current shareholders — founders, employees and historical investors — the opportunity to sell their shares on the market.
The company has benefited from bitcoin’s meteoric rise over the past year, with the cryptoasset’s price rising from US$6,500 last April to new records of as high as US$64,000 on Wednesday, before retreating somewhat.
Other virtual currencies — such as ether, litecoin or stellar lumens — have also surged in line with bitcoin.
The Coinbase entry “is potentially a watershed event for the crypto industry,” Wedbush Securities Inc analyst Daniel Ives said. “Coinbase is a foundational piece of the crypto ecosystem and is a barometer for the growing mainstream adoption of bitcoin and crypto for the coming years, in our opinion.”
Founded in 2012 in San Francisco by Brian Armstrong and Fred Ehrsam, the platform allows users to buy and sell about 50 cryptocurrencies, including bitcoin and ether.
In the first quarter, Coinbase had 56 million users and more than 6 million people per month making transactions, a company report showed.
The company reported that revenue in the first quarter increased almost 10-fold year-on-year to US$1.8 billion, while profit increased 25-fold, in the range of US$730 million to US$800 million.
If the situation seems favorable to Coinbase, questions remain the order of the day among observers, who recall the company’s dependence on the price of virtual currencies, which tend to be volatile.
On Wednesday, US Federal Reserve Chairman Jerome Powell told the Economic Club of Washington that cryptocurrencies are “really vehicles for speculation.”
“No one is using them for payments, for example, like the dollar,” Powell said. “It’s a little bit like gold... For thousands of years, human beings have given gold this special value that it doesn’t have from an industrial standpoint, but nonetheless for thousands of years, they’ve done so.”
Before its spectacular rise over the past few months, bitcoin had experienced setbacks, particularly in 2018 when it kept falling.
Some are also drawing attention to the distrust of lawmakers in several countries who are concerned about cryptocurrencies being used for illicit purposes.
“The bigger question is whether any valuation is sustainable, particularly given how many governments aren’t particularly enamored of cryptocurrencies,” CMC Markets UK chief market analyst Michael Hewson said. “Future regulation is likely to be a clear-and-present danger and a probable headwind.”
Coinbase was recently charged by the US Commodity Futures Trading Commission with “reporting false, misleading or inaccurate” information about cryptocurrencies, and manipulating the market between 2015 and 2018.
In a settlement, Coinbase paid a US$6.5 million fine and it was forced to push back its listing date on Wall Street.
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