Coinbase, the largest crypto exchange in the United States, has filed with the Securities and Exchange Commission (SEC) to become a publicly traded company through a direct listing (and not an initial public offering). Here’s what you need to know.
The story so far
On Jan. 28, the exchange formally announced its plans to go public via a direct listing on Nasdaq, “pursuant to a proposed direct listing of its Class A common stock.” This confirmed rumors from a Reuters report that emerged in July last year that stated the company was interested in listing on the stock market.
Initially, it was believed Coinbase would raise capital through an initial public offering (IPO); a process that involves creating new shares and employing the help of underwriters – usually banks – to help promote and market them to prospective investors. Instead, Coinbase has decided to pursue a direct listing, aka direct public offering (DPO), which essentially means cutting out intermediaries and only selling shares that already exist. No new shares will be created.
There are three distinct advantages of this route over an IPO:
- It’s much cheaper: Companies that already have a strong market presence don’t necessarily need the help of underwriters. A DPO dramatically reduces the costs of going public.
- The existing shares aren’t diluted: Because new shares aren’t created during direct listings, it means existing employee and investor shares aren’t at risk of being diluted once the company goes public. Dilution is where newly created shares enter the market and drive the price of the existing shares down.
- It’s much faster: By cutting out middlemen, there are far fewer regulatory hurdles to jump through before going public, including filing underwriter contracts with the SEC.
On Feb. 25, Coinbase’s Form S-1 was officially published by the SEC. Citigroup, Goldman Sachs and JP Morgan Securities were among the banks chosen by Coinbase to aid it through the listing process.
Following the quarterly earnings call on April 6, Coinbase said its monthly transacting users have grown 117% quarter-on-quarter, helping it to secure a net income of $800 million since the start of 2021.
What symbol will Coinbase shares trade under?
Coinbase Class A shares will debut on the Nasdaq Global Select Market under the ticker COIN.
When will Coinbase COIN shares be listed?
Who will be able to buy Coinbase COIN shares?
Since COIN shares will be listed on the Nasdaq exchange, it means anyone who has an account with a brokerage that deals in U.S. stocks will be able to purchase COIN shares. Similarly, investors will also be able to purchase COIN shares on any mobile trading app that lists Nasdaq Global Select Market stocks.
Leading centralized cryptocurrency exchange Binance announced it will be listing COIN stock tokens on its platform too. It describes these new stock token assets as "zero-commission digital tokens fully backed by a depository portfolio of underlying securities that represents the outstanding tokens" and entitles holders to "economic returns on the underlying shares, including potential dividends."
COIN stock tokens will be traded against Binance's native stablecoin, BUSD, and means users will be able to purchase fractional COIN shares.
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