Coinbase(COIN)’s hot direct listing

3 min readApr 19, 2021

Coinbase is a platform to invest, store, spend, earn, and use crypto assets. The rise of crypto assets fuelled phenomenal buying momentum and its popularity. This brought in huge transaction revenue for Coinbase. A high valuation at $100 billion made this listing a highly anticipated one. For reference, some other companies at this valuation are Lockheed Martin, BHP Group, Citigroup.

Coinbase’s listing is a direct listing, what is a direct listing?

Unlike IPO which creates more shares, a direct listing gives individuals the same opportunity to buy the stock at the same time as hedge funds and mutual funds.

In a traditional IPO process, the company works with underwriters(big investment banks) to set the terms and structure of the offering including the share price. The underwriters have the right to offer IPO shares to clients which include hedge funds and mutual funds. This is why in an IPO, institutional and wealthy investors can buy big volumes of shares at IPO price before the public. There is however a lockup period which usually lasts up to 180 days from the start of trading. Coinbase did not need to raise extra cash and went with the path of direct listing. Everyone can buy once the stock starts trading. There is no lockup period.

Why the hype

Revenue growth has been explosive.

Revenue in 2020: $1.27B

Revenue in 2021 Q1: $1.8B.

That’s right, revenue in solely 2021 Q1 surpassed the revenue for the whole of 2020.


Volatility in the price of Bitcoin and Ethereum. Transaction revenues from Bitcoin make up 41% of the total revenue, and 15% from Ethereum. Volatility in cryptocurrency is a common event. A drop in prices of either cryptocurrency reduces the revenue for Coinbase since it charges a percentage of each trade. The commission is worthless now.

SEC intervention. SEC regulation would apply to Coinbase since it is listed in the U.S, such as the inquiry on Ripple(XRP) which resulted in Coinbase’s suspended trading in January 2021 on its platform. Investors on Coinbase come from all around the world impacted by not under the jurisdiction of the SEC, we can imagine they are not too happy about this decision.

There have been rumors the SEC wants to put in regulation for some time now. If it does happen, more investors will stand on the sidelines to watch what will happen instead of investing. Regulations could also affect the way companies have been making revenue from loans, staking, liquidity mining.

Competition is intense in the platform space; the biggest platform now is Binance. There is no doubt more platforms will rise to the competition in the future. For Coinbase, 96% of revenue in 2020 is transaction revenue. When platforms compete, the most probable marketing tactic to be employed is to slash trading commission to lure new users.


Coinbase is profitable thanks to the robust revenue. Even though the stock is currently trading at a relatively high PE ratio of 62 at a stock price of $342 on 16 April, companies are trading at a premium even though they are not profitable. One example is Tesla which had not to make any profits for 8 years but people were willing to pay a premium due to high expectations for the company’s future.

Multiple streams of revenue. In a worst-case scenario where transaction revenue falls to 0 from there, because prices of bitcoin crash and nobody wants to talk about cryptocurrency for the next 5 years, let alone trade it. Coinbase still can potentially have alternate revenue streams from Coinbase commerce, Banking services, Loan services, Staking.

Diversity in cryptocurrency portfolio by investing in Coinbase. There are around 50 cryptocurrencies trading on Coinbase. Any potential growth in any of these coins other than Bitcoin or Ethereum can benefit the revenue stream for Coinbase.

Should you invest in Coinbase?

If your portfolio has not reached the desired exposure in cryptocurrencies, Coinbase could be a good option to invest in during the dip. The company is already profitable and potentially has a long runway for growth. Especially if you are a high believer in the crypto space.




Financial minimalist looking for the next investment opportunities