Coinbase's Public Debut Is Set. Should You Invest?

Cryptocurrency exchange Coinbase is set to go public via direct listing on Wednesday, April 14. In this Fool Live video clip, recorded on April 5, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss what we know so far about the company's public debut and what investors should keep in mind. 

Jason Moser: Well, we have talked a lot about Coinbase on this show over the past several months. Coinbase looking to go public here, and we've now got a bit of a clearer picture as to when that's going to happen. Matt, tell us the latest news here in regard to Coinbase's impending IPO.

Matthew Frankel: Coinbase got SEC approval to start their direct listing on April 14. About a week and a half from when we're recording this. The SEC has approved, like I said, they are doing a direct listing, meaning they're selling shares directly to the public, not going through underwriters and stuff like that. We do know that they're ticker symbol will be COIN, C-O-I-N. Pretty easy to remember.

Moser: Easy.

Frankel: They are going to sell 115 million shares in their IPO. The latest price per share on the private market was about $343. That means they're going to raise about $5 billion in their IPO. I'm sorry, they're selling about five billion dollars worth of existing shares. They're not actually raising the money. Based on that share price, which isn't an official price on where it's actually going to start trading, but that's what they're getting use to set the day one reference price. The private market valuation is about $68 billion. Coinbase had a phenomenal year in 2020. They're profitable. They made a little over $300 million dollars.

Moser: Wait, hold on. There's an IPO that's getting ready to hit and they actually make money? This is new territory. What's going on here, Matt?

Frankel: They made money, great growth, $1.2 billion in revenue last year.

Moser: Wow.

Frankel: But I would put a big asterisk on that because, what happened with Bitcoin (BTC -0.21%) last year? Bitcoin is trading right now for about 10 times where it was a year ago. When you get an exchange that transacts in a certain asset and that asset grows tenfold in a year, of course the company is going to make money.  Coinbase wasn't profitable before Bitcoin started going crazy. It's like this wave of mortgage lenders we've seen go public. Remember we've talked several times on the show about how refinancing volume has doubled or tripled from year ago at certain points during the pandemic. The numbers look great right now because conditions are ideal for mortgage lenders, so they're all going public. The same thing could be said here. We already saw eToro, a fellow cryptocurrency exchange is going public through a SPAC merger. Coinbase is going public through direct listing. They would not have gotten a $68 billion valuation a year ago. The question is, are these higher bitcoin prices, and more importantly, the higher interest in bitcoin, is that here to stay or is it going to pull back over the next year or two as the market stabilizes? Because right now the market in cryptocurrencies is all over the place. If you believe higher volumes are here to stay, and if you're a believer that Bitcoin could be $500,000, $1 million someday, which a lot of people are, Coinbase at $68 billion could be achieved.

Moser: Yeah.

Frankel: If you think Bitcoin is going to be a mainstream form of payment, people are going to need a place to buy it, Coinbase could be cheap at its current valuation. It really depends on what direction the cryptocurrency market takes as to whether that $68 billion figure is cheap or expensive.