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Cryptocurrency Exchange Coinbase Is Planning to Go Public in 2020

By Matthew Frankel, CFP® – Jul 9, 2020 at 7:57AM

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The exchange isn’t planning a traditional IPO.

Cryptocurrency exchange Coinbase is reportedly planning to go public, according to reports. Shares of Coinbase could potentially be available for the public to trade as early as this year, but nothing has yet been filed with the Securities and Exchange Commission.

In its latest fundraising round in 2018, Coinbase was valued at more than $8 billion. It's unclear whether the company's public valuation could be higher or lower than that amount, and we likely won't know more details about pricing until official paperwork is filed.

Gold token with bitcoin symbol

Image source: Getty Images.

Not a traditional IPO

According to the reports, Coinbase is aiming to go public through a process known as a direct listing, not a traditional initial public offering (IPO). This is a somewhat rare way to bring a company to the public markets, but it isn't exactly unheard of -- Spotify and Slack are two examples of major companies who went public by direct listings in recent years.

In an IPO, companies sell new shares to the public in order to raise capital. In a direct listing, a company simply makes its existing shares available to the public by listing on a major exchange. Company insiders and other early investors can choose to sell (or not sell) their shares once the direct listing is completed.

There can be several key advantages to this route. For one thing, it's cheaper -- because no new shares are being sold, there is no need to hire underwriters. And insiders can sell their shares as soon as they want to, unlike with an IPO, which typically has a lockup period restricting insider selling.

Of course, a direct listing is only appropriate for companies that don't need to raise money. But it can be a smooth and effective way to bring a company's shares to the public markets.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Slack Technologies and Spotify Technology. The Motley Fool has a disclosure policy.

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