Prelude to an IPO
Currently, cryptocurrency exchanges play a vital role in facilitating exchange of cryptos for fiat currencies or other altcoins. Coinbase is regarded as the leading cryptocurrency exchange by market capitalization.
Coinbase has set up an easy-to-use scalable platform that makes the majority of cryptocurrencies accessible to everybody. Headquartered in San Francisco, the exchange`s influence in the crypto sphere has been reflected by its famous ‘Coinbase Effect’. As reported by recode, and hinted at by Ran NeuNer, host of the CNBC’s Crypto Trader, Coinbase is near to a deal that could balloon the exchange’s value to $8 billion. This would represent a five-fold increase from its 2017 publicly-reported valuation of $1.5 billion
Tiger Global, a renowned New York-based investment fund has engaged Coinbase in closed-door negotiations for an investment of up to $500 million. The deal could see the investment fund and its shareholders receive a significant stake in the privately-operated crypto platform. Moreover, Tiger Global`s likely investment could enable it to acquire a bit of the current shares.
This information is strongly indicative that Tiger may be paying a significant premium for shares, prompting the pre-IPO. Although Coinbase has witnessed rapid volume and interest drop offs, it has still continued to post massive profits. Therefore, this is an attractive investment to Tiger since Coinbase has remained profitable despite its ambitious expansion plans.
If the deal materializes, Coinbase is set to rank among the most valuable start-ups worldwide. This deal will verify that crypto has all the potential to become a significant player in the global scene. Additionally, this deal will potentially place Coinbase at a greater financial influence than Robinhood. (In a recent mid-2018 financing round, Robinhood, the outstanding US-based fintech start-up was valued at approximately $5.6 billion.)
How Coinbase intends to use funds from the IPO
Coinbase is expected to add around $250 million in new funds to its coffers. Moreover, an additional $250 million could be used in buying out the existing investors. However, the exact proportion for this endeavor is yet to be determined.
As the undisputed leader in the crypto asset marketplace, Coinbase generates significant amounts on every order. The company’s core business suffered extensively with the sell-off experienced in crypto prices at the start of the year. Coinbase could use some of the funds to entice potential investors who are interested in creating an open financial system for the crypto world without focusing on the market’s volatile prices.
The company’s IPO will also enable existing investors to cash out without the company raising any new funds by itself. Therefore, funds from the IPO will enable the company to purchase its stock which will eventually increase its valuation significantly.
Coinbase has partnered with several major investors who are responsible for its high valuation. In the past, it has partnered with British Bank Barclays, Trading Technologies (TT) and Caspian, in addition to its rumored talks with Tiger Global in its forthcoming IPO.
The strategic investment and planning will enable Coinbase to soar and attract other major investors. The company has been scaling up rapidly preparing for its looming IPO. Good governance coupled with sustainability is what will keep the company rising into the foreseeable future.