The news has just come across the wire (Zerohedge link) that Coinbase’s much anticipated direct listing onto the Nasdaq tomorrow (April 14) will issue with a “reference price” of $250/share, for a market cap of $65B USD.
As I wrote in last Friday’s note:
“The number being bandied around is that Coinbase will debut with a $100 Billion market cap, with an adjusted EBITA of $1.1 Billion for Q1. Let’s say they come in at $5 Billion for the year (which is a low growth scenario), that would put them at about a P/E of 20. As a value investor who finds nearly everything in the world today quite nuts, this actually sounds pretty reasonable...
...I would buy at or below the issue price, based on a $90B to $100B valuation“
With 261 million shares out, fully diluted, that means I’d be a buyer at or below approximately $383/share.
This could play out a number of different ways, including
- pop-and-drop: COIN hits the ground running and then fades out in the latter half of the session, dropping toward or even below its issue price
- buy the rumour / sell the news: the much anticipated offering which has arguably buoyed the sector in anticipation then sells off on the reality
- moonshot: COIN just blasts off and never looks back
Of course, it’s hard impossible to know what will happen, so what I always try to do is just stick to my investment thesis and my own internal valuations. I’ve found that trying to trade the short term gyrations of this market (or any market, for that matter) is something I’m not very good at. Knowing that, I have tried to discipline myself to tune out the near term movements and stay focused on the overall strategy.
That strategy, as I’ve emphasized in the writings, is “picks and shovels”. Coinbase represents the ultimate “picks and shovels” at the intersection between the legacy and crypto economies. It also hearkens to an ironically old fashioned IPO of yore, in that the company is already growing and profitable by the time it hits the public markets. Inconceivable in today’s markets where many IPOs don’t even have business models (or even businesses in the case of SPACs), let alone profits.
Yesterday’s Breakdown with NLW over on Coindesk focused specifically on the Coinbase IPO and the various scenarios it could portend, it’s a quick listen and highly recommended.
The last thing you might wonder is how large of a position I’m taking, provided I can get my price. At the moment my crypto portfolio has 10 names in it, initially spit close to evenly, now I’m heavier weighted in GLXY, NDA.V and BITF.
I’m not backing up the truck on COIN, so I’ll probably go in for about a 3% to 5% weighting for now. Again, if it comes out and just screams higher before I can even catch a trade I will step back and hold off for now.
