Coinbase, one of the largest cryptocurrency exchanges in the U.S., is set to go public later this month. And as the price of Bitcoin (BTC +4.55%) has soared to more than $60,000 lately, investors are watching the company's public debut very closely.
There's a full breakdown of Coinbase's stock over at Millennial Money, but I'm going to focus here on how the company's valuation soared from $1.6 billion to $90 billion in less than four years.
Image source: Getty Images.
The first billion is the hardest
In August 2017, Coinbase closed a $100 million Series D funding round that put the company's valuation at $1.6 billion. Private companies are often valued based on the amount of funding they receive during investment rounds. Surpassing a $1 billion valuation was impressive at the time, but no one had any idea how much the company's value would grow in the next few years.
A little more than a year after the Series D round, in October 2018, Coinbase held a Series E round in which it received $300 million. That pushed the company's valuation up to a formerly incomprehensible $8 billion.
Let's put this valuation into perspective for just a moment. At the end of 2018 -- when the price of one Bitcoin was just under $3,900 -- Coinbase was valued at $8 billion. Now, the price of a single Bitcoin is above $50,000.
Of course, the value of Coinbase isn't directly tied to the increase in Bitcoin's price, but it likely has influenced how much private investors value the company.
Private investors drove up Coinbase's valuation
Getting from $8 billion to $90 billion is no easy feat, but Coinbase did it in less than three years as private investors gobbled up shares of the company.
Coinbase isn't publicly traded, but the company held a secondary share sale on the Nasdaq Private Market beginning at the end of January and sold those shares every week until the first week of March.
According to Axios, the first batch of 75,000 shares sold for about $200 per share, which skyrocketed the company's valuation to $54 billion. In the following weeks, Coinbase's private share price continued to climb all the way up to $350 in March -- giving Coinbase a final valuation of around $90 billion.
Will Coinbase's valuation go higher before it goes public?
According to Bloomberg, Coinbase will go public later this month, and with the sale of the company's private shares already stopped, it's likely that the company's valuation won't change again before it goes public. It's also worth mentioning that just because private shares were priced at $350, it doesn't mean that they'll trade for the same price once the stock trades publicly.
For investors waiting for Coinbase's shares to start trading, knowing why the company's valuation jumped so much so quickly can help you make a more informed decision if/when you decide to invest in Coinbase.
One note of caution on that front: Newly traded public companies often see some volatility early on. Additionally, waiting at least several months, once the company has reported a few quarters of results, is always a good idea before investing in a newly traded company.
