Coinbase, Robinhood Shareholders Face Significant Stock Dilution: JPMorgan

Like many publicly traded tech firms, Coinbase and Robinhood have offered employees generously amounts of restricted stock units as part of their compensation.

AccessTimeIconJul 25, 2022 at 6:19 p.m. UTC
Updated May 11, 2023 at 4:18 p.m. UTC
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Shareholders of crypto exchange Coinbase (COIN) and brokerage platform Robinhood Markets (HOOD) face risk of higher share dilution stemming from restricted stock units (RSU) included in employee compensation plans, JPMorgan (JPM) said in a note to clients Monday.

The dilution could come at an unfavorable time for shareholders given that both stocks have suffered amid the global crypto price and equity market routs. Shares of Coinbase and Robinhood are down about 73% and 51% for the year to date, respectively.

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  • “Coinbase and Robinhood, like their tech-company peers, issue substantial equity to company employees allowing companies to both attract and incentivize employees while keeping cash compensation lower,” JPMorgan equity research analyst Kenneth Worthington said in a note to clients.

    Given the sharp drop in share prices, JPMorgan expects Coinbase and Robinhood to lower employee equity grants via RSUs, though it still expects “share creep from RSU issuance will drive dilution to a still substantial 7% pace annually in coming years.” The bank estimates if that 7% pace were to persist for five straight years, it could reduce the value of each company to existing shareholders by 30%.

    As crypto and equity markets remain under pressure, many public and private companies continue to embark on cost control efforts. In June, Coinbase said it was laying off around 1,100 employees, while Robinhood said it was cutting roughly 9% of its full-time workforce in April.

    JPMorgan has a neutral recommendation on Coinbase, and is underweight on online brokerageRobinhood.

    Despite these potential dilution concerns, many institutional investors, perhaps sensing an opportunity to purchase shares on the cheap, have recently been adding to their positions in Coinbase.

    UPDATE (July 25, 18:40 UTC): Added information about institutional investors in last paragraph.




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    Michael Bellusci is CoinDesk's crypto reporter focused on public companies and digital asset firms.


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