- Santosh Rao, the head of research at Manhattan Venture Partners, believes a $100 billion valuation for Coinbase is reasonable.
- Manhattan Venture Partners was an early investor in Coinbase, Palantir, Draft Kings, and more.
- Based on estimated 2022 figures, Coinbase will trade ataround 11x sales and 27x EBITDA with a $100 billion valuation.
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Coinbase is set to make its public trading debut on Wednesday and some market commentators are questioning its lofty valuation, but not Manhattan Venture Partners.
Santosh Rao, the head of research at the merchant bank, believes a $100 billion valuation for Coinbase is “totally reasonable” given the disruptive nature of the crypto firm.
Manhattan Venture Partners was an early investor in Coinbase as well as a number of other big-name tech companies like SpaceX, Palantir, and Draft Kings.
Rao sat down with CNBC on Wednesday to discuss Coinbase’s public debut and his firm’s investments.
The head of research highlighted the fact that based on estimated revenues and earnings for 2022, at a roughly $100 billion valuation, Coinbase will trade at just over 11x sales and 27x EBITDA.
Those figures aren’t outlandish for a company that has demonstrated consistent growth, according to Rao.
Coinbase released impressive first-quarter results on April 6 that showed a 117% quarter-over-quarter increase in monthly transacting users. The company also earned more revenue in the first quarter of 2021 ($1.8 billion) than it did in all of 2020 ($1.3 billion).
The rising revenue came amid a historic run for bitcoin that saw the cryptocurrency rise more than 300% in 2020, and an additional nearly 100% in the first quarter of 2021 alone.
Some market commentators are predicting a further 10%+ breakout moving forward as well.
When asked whether crypto prices need to keep going higher in order for Coinbase to maintain its lofty valuation, Rao said it would help, but argued the company has a range of services on offer to offset any downfall in crypto prices.
“That’s their core business at this point, but they have other services too. And they have a subscription product coming up, a whole range of services, the custody services, they have a number of other levers to pull as they go up,” Rao said.
Read more: Bitcoin is a headache to store, and that’s created an investment opportunity that could theoretically pay determined traders big risk-free returns by December
The head of research added that, in his view, there’s no reason why crypto prices should stop going up as investors are starting to realize the space will become “an integral part of the financial system going forward.”
Rao also noted that of the best features of Coinbase is that it’s “agnostic” towards individual cryptocurrencies, meaning if bitcoin falls and other cryptocurrencies rise, Coinbase will still benefit.
The head of research at Manhattan Venture Partners ended the interview by saying that Coinbase has the breadth, scale, and technology to keep competitors at bay over the long haul.
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