Coinbase’s COIN stock has received a reference price at $250 from Nasdaq ahead of the awaited direct listing on the stock exchange. This set price has been viewed as very low compared to the current FTX pre-trading price of $600, although it’s on thin 24-hour volume of under $4 million.
The major U.S. exchange is going public through a direct listing instead of the popular method of conducting an IPO. This means that the reference price is not a direct indicator of the company’s market cap. The reference price is an implication of the valuation of $65 billion, which is lower than other estimates that range between $68 billion and $120 billion.
Reason for the reference price
Nasdaq made an announcement which stated that since Coinbase has not traded on any listing market previously nor had any day’s closing price, their Regulation SHO Rule 201 would not apply to it until its second day of trading on Nasdaq. The reference price was therefore not an offering price and the opening price would be determined based on buy and sell orders in the opening auction on Nasdaq.
The Coinbase listing is the first significant direct listing on Nasdaq. According to CNBC, across the five significant direct listings that have taken place on the New York Stock Exchange; Spotify, Slack, Palantir, Asana, and Roblox, the opening price was on average about 37% above the reference price. Therefore, Coinbase’s opening price is above $340 with a valuation of around $90 billion.
This trading price has an opportunity to rise higher considering the pre-listing contract between Coinbase and CBSE which is currently trading around $600 on the FTX exchange. This is a representation of a 140% premium above the reference price. There is also another indicator supporting a strong first day for COIN. This is the Q1 2021 financial statement that suggests that revenue rose to $1.8 billion bringing in net income up to $800 million, up from the $32 million that had been recorded during the same period last year.
Before the Nasdaq listing, Coinbase planned a surprise for all 1,700 full-time employees by gifting each 100 shares each, worth $25,000 at the current reference price. The thank you gift was given on March 25 and has no strings attached. The employees are therefore free to sell immediately after the listing goes public if they please. These shares are in addition to previous 105,510 share options that had been handed out to employees of Coinbase’s Irish division in recent years.
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