In one of 2021's most anticipated IPOs, massive cryptocurrency exchange Coinbase is planning to go public through a direct listing. And while the IPO market has been red-hot recently, reports indicate that Coinbase could fetch a valuation of $50 billion to $75 billion as a public company. In this Fool Live video clip, recorded on Jan. 25, Fool.com contributor Matt Frankel and Industry Focus host Jason Moser talk about the upcoming IPO and what they're watching.
Jason Moser: Coinbase, this is an interesting business just based on what they do. This is your favorite part of the financial sector, right, cryptocurrency. I'm just kidding. [laughs]
Matt Frankel: Well, before we get into this whole segment, I want to say just because we are talking about these two companies doesn't necessarily mean I'm planning on buying the IPOs.
Moser: Right. That's a good point to make. This is not advice to invest in these businesses. We're giving you a little bit more of an understanding of what these businesses are and why folks are paying close attention to these IPOs.
Frankel: Anyone who has listened to us more than once knows that bitcoin is not my favorite place to put money.
Moser: Yeah. Well, with that in mind.
Frankel: With that in mind.
Moser: Coinbase, because Coinbase is a cryptocurrency exchange. That's essentially what it is.
Frankel: Yeah, they're a cryptocurrency exchange.
Moser: Why does this IPO have you so intrigued?
Frankel: Well, the reason I'm really interested in it is because the cryptocurrency market is almost at a trillion dollars in total market cap right now. A lot of the smaller coins are really gaining popularity. Coinbase is adding additional options. They offer 43 different cryptocurrencies on their platform right now. They have $90 billion in digital currency under management right now. They are a big deal. They've done $455 billion in volume since they started and most of that is pretty recent. There's over 43 million people who use Coinbase. Even if I'm not one of them, some people like it.
Moser: Sure. [laughs]
Frankel: What I'm really watching is how much the market's going to think this thing is worth. In December, a pretty good estimate put it at $28 billion valuation, which given the size of the market seems cheap. But then another report a week or two later said it could get up to $75 billion in an IPO valuation.
Frankel: That's a pretty big range for estimates within a couple of weeks of each other, and these were all estimates done by crypto experts. It's not like one was by someone who is down on this space and one's by someone who is really optimistic. That's a pretty big range. They filed a confidential S-1 filing, so we don't know that much about how much their sales have been, how much their revenue's growing. With crypto prices kind of all over the map over the past few years, it's really tough to even put that into context when you do see the numbers.
Frankel: Bitcoin's tripled over the past year, so if they say their revenue's tripled, is that just because bitcoin has gone up in price or is it because the platform is getting more and more attention? There's a lot of questions to be asked. This one is kind of a TBA in terms of when it's going to actually happen. They did a confidential filing, we'll get some more information before they go public. Airbnb did their confidential filing months before they went public. So we don't know the exact timetable. It's entirely possible a SPAC could swoop in and take them public at this point. But one thing that I saw today that was really interesting, Coinbase is going to sell shares to its members before the IPO, privately.
Frankel: They sent out an email today. They're going to send all their members an email at, they said, noon Pacific Time, which is 3 p.m. our time, detailing the process. I am going to be keeping an eye on that to see, because to do that, they're going to have to say something about the valuation.
Moser: I would imagine so. Yeah. [laughs]
Frankel: They're not just going to say, you're going to pay $20 a share. They're going to say what that's based on. I'm going to be paying attention to that. Coinbase is really on my watch list just because I have a lot more questions than answers, is the key takeaway.
Moser: Yeah. Well, that will definitely be an interesting one to learn about, and it feels like the market would receive it probably well just based on all the enthusiasm in cryptocurrency today. But as you mentioned, there are a lot of questions in regards to the actual business and how it makes its money, and what that is really all dependent on, and we won't know that until more documents come out. I know there's been chatter of this IPO hopefully happening at some point early in February. Again, like you said, it's really to be determined, we just don't know yet, but certainly one to keep an eye on and one that I am certain we will garner a lot of interest when it does finally go public.