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Why Coinbase could be worth as much as $100 billion. Here’s who is getting rich off of it.

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The public listing of cryptocurrency company Coinbase could redefine Wall Street blockbuster paydays —and shine a light on the big money being made, even if measured in good old-fashioned dollars, in the booming market for digital currencies.

Shares of the cyptocurrency company are going public through a direct listing and not a traditional IPO, which means the company is not selling shares to raise money but just listing the shares to trade publicly for the first time. Trading is expected to begin Wednesday. 

Some Wall Streeters are predicting the company’s stock market value could reach $100 billion within a day. Coinbase’s bankers, however, set what’s called a reference price, or their best official guess for where the company’s stock could start trading, of $250 a share. That would give the company a market cap of $65 billion.

That’s about the same market capitalization as the company that owns the New York Stock Exchange, which is the largest stock exchange in the world and was famously started under a buttonwood tree in 1792. Coinbase, based in San Francisco, launched in 2012.

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Coinbase has succeeded by making it easier to buy and sell in arcane markets for cryptocurrencies, the most widely known of which is bitcoin. The company reported turning profitable last year. But critics say it is getting an artificial boost from the soaring price of bitcoin. spiking to nearly $60,000 lately, or 10 times the $6,000 it was just a year ago. Those critics say Coinbase’s profits will plunge when the price of bitcoin drops, as it frequently has in the past.

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“Even though Coinbase’s revenue surged over the past 12 months, the company has little-to-no-chance of meeting the future profit expectations that are baked into its ridiculously high expected valuation of $100 billion,” wrote analysts from research firm New Constructs in a report on the Coinbase deal.


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And while the company hasn’t been prone to significant cyberattacks, there have been instances in which customers have complained that hackers were able to access their phones and drain substantial sums from their Coinbase apps. One customer sued the company after claiming $100,000 in bitcoin was stolen from his account and alleging the company offered no help in getting it back.

Here are 5 key facts to know about the buzzy bitcoin-related offering.

1. Coinbase is the NYSE, Charles Schwab and JPMorgan Chase of bitcoin rolled into one

Coinbase is the world’s largest exchange for digital currencies. That’s spurred some people to compare it to the New York Stock Exchange. Not quite.

Coinbase is the largest brokerage firm for digital currencies. It also functions as a bank, offering digital wallets that allow users to store and spend their bitcoin from their Coinbase account. So when someone trades bitcoin using Coinbase, they have to pay the company a brokerage fee as well as the actual cost of trading the stock. There also are bank-like charges for converting dollars into bitcoin and bitcoins into other types of digital currency, like ethereum or dogecoin

The result is Coinbase is able to make about 50 times as much on each digital currency trade than the NYSE can on stocks. Yet the market value of bitcoins and other digital currencies are still a small fraction of the total value of the U.S. stock market.

2. Coinbase is growing quickly, for now 

Coinbase has an advantage over most start-ups. It is already making money. The crypto company made $330 million last year, according to a financial filing. But it’s hard to know how sustainable that is. 

Revenue of $1.8 billion in the first three months of this year. That’s $1.2 billion more than the company saw all of last year.

Nonetheless, Bitcoin has disclosed only two years of operating results, meaning last year’s profits could have been a fluke. It lost $30 million the year before. And while revenue more than doubled last year, expenses also rose, by nearly 50%. Remember: Coinbase makes more money when the price of bitcoin and other digital currencies are higher. A drop in the price of bitcoin could cause trading to slow, and those higher costs could quickly push the company back into the red.

In addition, bitcoins and other highly volatile digital currencies have a long way to go before most people are willing to invest in them or use them to buy things rather than trusted greenbacks. Coinbase plans to encourage that tectonic shift as much as it can. It spent more than $50 million on sales and marketing last year and plans to more than double that this year. That means its expenses will increase.

3. At $65 billion, Coinbase would be the most valuable exchange in the world 

A Coinbase valued at $65 billion would have market cap is similar to New York Stock Exchange owner Intercontinental Exchange. But ICE, which owns a number of exchanges, gets at least 30% of its revenue from sources other than the NYSE. The U.S.’s second largest exchange, the Nasdaq, has a market value of $27 billion. Coinbase would be worth three times that.

It’s worth noting that exchanges are generally ranked by the total market cap of all the assets or investments traded on the exchange. Based on that measure, Coinbase would rank as the 11th largest exchange in the world, far behind the NYSE, where $24 trillion worth of stocks are traded. The total market cap of all cryptocurrencies currently is $2 trillion.

Small fish, big pond. That’s one reason why numerous commentators say even Coinbase’s $65 billion value looks too high and its stock price will some day drop. What’s more, based on its latest annual earnings of $322 million, Coinbase would have a stock price-to-earnings multiple of 201. That’s high. Google parent company Alphabet has a P/E ratio of 29. (Of course, electric car company Tesla’s P/E is over 1,000.)

Analysts at research firm New Constructs calculated that $19 billion would be a more reasonable, and sustainable, market cap for Coinbase. That would translate to a stock price of $75.

4. Coinbase’s CEO was paid $2 billion last year

The deal would make Brian Armstrong, Coinbase’s chief executive and co-founder, very rich. The company pays Armstrong a yearly cash salary of $1 million. On top of that, Armstrong was awarded stock options last year to buy 9.3 million shares at $23 each. At the time, the company valued those options at $56 million. At a stock price of $250, those same stock options would be worth just over $2 billion.

That’s only what Armstrong was paid last year. He already owns or has options to own 36 million Coinbase shares. At $250 a share, that stake would be worth $9 billion.

5. Rapper Nas and venture capitalist Marc Andreessen are Coinbase investors

Venture capitalists stand to make billions on the Coinbase listing, too. 

The company’s biggest investor is Andreessen Horowitz, venture capital firm started by Marc Andreessen, who helped launch Netscape, one of the Internet’s first browsers. Andreessen’s firm holds 15 million shares of Coinbase, which at $250 a share would be worth $4 billion. It got most of those shares back in 2013, when it led a $25 million investment in the company.

A surprise winner in the Coinbase deal: the rapper Nas. Nasir Jones’s firm Queensbridge Venture Partners invested as much as $500,000 for nearly 100,000 shares of the company in 2013, at the same time as Andreessen’s firm. Good call: At $250, Nas’s firm’s shares are now worth $25 million. 

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