On Thursday, January 28, 2021, Coinbase revealed on its blog about its decision to join the public markets via direct selling.
The crypto-currency exchange, Coinbase has more than 42 million registered users across the globe and assets worth US$ 90 billion. Coinbase is the leading crypto-currency in United States. On December 17, 2020, Coinbase had hinted to go public as it submitted a draft registration S-1 Form to the Exchange Commission. With a fund of US$ 537 million already raised by Coinbase as a private company, it will not be using the traditional IPO process anymore. The company has planned to use direct selling process in which it will not raise any new fund or provide new shares, rather the company would include the shares in the public listing. Other well-known companies have done direct listings as well with the most recent being Palantir, Spotify, Slack Technologies, and Asana.
Direct listing has its own benefits for the investors and the company. The best example of direct listing is Airbnb IPO, which had opened its doors for retail investors via direct listing. Before going public, the stock of Airbnb was at US$ 68/share but later on, the stock was trading at US$ 146/share. Choosing the direct listings will enable the companies to avoid the procedure that was required for traditional IPO processing. This direct method removes the need of pricing and the company can sell their old stock at inflated prices. In this listing process, the company will just disclose the list of their shares before starting the trade. The only drawback of direct listing is that the company cannot raise new capitals.
Founded back in 2012, Coinbase had a market value of US$ 8 billion in 2018. However, after the recent market activity, the valuation of the company is reported to exceed US$ 50 billion.