U.S.-based cryptocurrency exchange Coinbase Global became the first cryptocurrency exchange in the U.S. to become a publicly-traded company. Its Class A common stock began trading on the Nasdaq Global Select Market under the ticker symbol “COIN” on Wednesday.
The largest US cryptocurrency exchange made its debut in the stock market by opening trading at $381, immediately valuing the exchange at nearly $100 billion, which is over twelve-fold of its last valuation as a private company. It had raised more than $500 million from venture capital investors, who had valued Coinbase at $8 billion.
The stock closed trading on Wednesday at $328.28, after trading in the range of $310.00 to $429.54 in a violate trading day as it was an unpredictable entity. The stock is up $25.89 or 7.89 percent to $354.17 in Thursday’s pre-market trade.
The Nasdaq had set the reference price for COIN at $250 per share on Tuesday night. Though it was not the actual price for investors to buy and not an indicator of the company’s market cap, it just served as a benchmark price. The opening public price is determined based on buy and sell orders in the opening auction on Nasdaq.
The company began operations in 2012 with the radical idea that anyone, anywhere, should be able to easily and securely send and receive Bitcoin. Coinbase is in the process of building the cryptoeconomy. It has over 43 million users worldwide and has transacted more than $456 billion to date, according to the latest filing by the company with the SEC.
Coinbase’s direct listing on the Nasdaq was closely watched by investors and was described as a “watershed moment” for the industry. The market debut will be a big boost to the cryptoeconomy as it lends legitimacy to digital currencies. It will also greatly boost the acceptance from the mainstream financial services industry, including investors, regulators, and the general public.
San Francisco-based Coinbase had previously announced in mid-December that it had confidentially submitted a draft registration statement on Form S-1 with the SEC to pursue a proposed direct listing of its Class A common stock. The filing for the proposed public direct listing of its Class A common stock was declared effective by the SEC on April 1, 2021.
Coinbase, which was looking for a listing in March, decided to postpone the listing by a month after it was ordered by the Commodity Futures Trading Commission (CFTC) to pay a civil penalty of $6.5 million in mid-March to settle charges of reckless, false, misleading, or inaccurate reporting.
Unlike the traditional Initial Public Offering (IPO), the direct listing process (DLP) option to go public involves selling of existing shares by investors of the company directly to new investors instead of offering new shares in the company. No shares are sold in advance like in an IPO. A reference trading price will be fixed by the company a night ahead of the listing.
The DLP has become much more attractive than an IPO in recent times as it makes existing stock owned by employees and/or investors available for the public to buy and does not require underwriters or a lock-up period. It also increases liquidity for existing shareholders and is usually cheaper than an IPO.
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