Coinbase (COIN) IPO Discussion - Happening 4/14

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Nothing better epitomizes the zaniness ruling financial markets these days than the great expectations surrounding the Coinbase IPO slated for April 14. The euphoria over the first major cryptocurrency player to go public is of a piece with the damn-the-fundamentals craze that's spawned the Tesla phenomenon and pushed U.S. equities to near-bubble territory. Wall Street analysts and Bitcoin-loving investors are forecasting that Coinbase could debut at a $100 billion valuation.

To justify that number, the math shows, Coinbase would need to mushroom into the biggest financial exchange in the world. "It's part of the overall frenzy creating bubbles everywhere," says David Trainer, an analyst at research firm New Constructs. "When you do the numbers, there's no way to make an argument for owning this stock with a straight face."

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How fast must Coinbase grow to be worth $100 billion?

Trainer ran the numbers. For Coinbase to reach $100 billion market cap by 2027, its revenues would need to jump 50% a year to $21.3 billion, while free cash flow keeps pace, waxing to $3.2 billion, more than 10 times the figure for last year. It would still be selling at a rich multiple of 30 times cash flow. At $20-billion-plus, Coinbase would exceed the combined 2020 revenues of ICE and Nasdaq by 50%.


Put simply, to reach the size worthy of a $100 billion market cap—and that's starting today—Coinbase would probably need to become the biggest exchange in the world. That's the bet investors are making if they buy its shares at the April 14 offering and beyond.

Can Coinbase get there?
For Trainer, grabbing the trophy looks like a mathematical impossibility. If Coinbase's operating margins decline to the average level of 23% for the 18 largest investment banks—still a big number—and its revenues grow at a strong 21%, the rate that Nasdaq achieved in its rapid growth phase, it will be worth $18.9 billion, or over 80% less than the $100 billion it could command next week.

Another distressing metric: Say Bitcoin's trading margin declines from 0.46% to 0.10%. That's still 10 times what ICE and Nasdaq are generating. To reach the $21.3 billion in revenue that rings the bell, by Fortune’s estimates, Coinbase would need to trade $17 trillion a year in Bitcoin and other tokens. That's four times the total volumes for all cryptocurrencies, on every exchange, for 2020.

For Coinbase CEO Brian Armstrong, a future in which such epic numbers are achieved looks anything but impossible. The S-1 states that "crypto has the potential to be as revolutionary and widely adopted as the Internet." He's selling a growth story for an investment that's still far from mainstream. For Trainer, Coinbase is the epitome of a "meme stock that's traded without regard for the fundamentals." The vision is compelling as long as it remains lofty and doesn't get too specific about the heroics needed to be worth $100 billion. Investors should keep in mind that they'll be paying a stratospheric price for backing a daring expedition that's unlikely to reach the mountaintop.

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I'm not sure if you're talking to me

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Yeah, the valuations don't always make logical sense these days. I've followed this because I have some stock in Voyager which I think will probably go up big or down big tomorrow based on what COIN does.

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I have 15 thousand DOGECOIN at avg cost .057 not a lot now but still buying 40 thousand is my goal by June and will keep buying till 100 thousand if possible.

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have 15 thousand DOGECOIN at avg cost .057 not a lot now but still buying 40 thousand is my goal by June and will keep buying till 100 thousand if possible.

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may wait for a pullback in a week or two after the initial profit taking

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