Coinbase Files S-1 Registration Ahead Of Going Public

Major cryptocurrency exchange Coinbase filed an S-1 registration today, disclosing pertinent company information to the U.S. Securities and Exchange Commission (SEC) ahead of its planned direct listing public offering. Per the filing, Coinbase’s class A common stock will be listed under the symbol “COIN.”

SEC Form S-1 is the initial registration form for new securities required by the SEC for public companies that are based in the U.S. Any security that meets the criteria must have an S-1 filing before shares can be listed on a national exchange (for Coinbase, this would be the NASDAQ). Companies usually file SEC Form S-1 in anticipation of going public. Form S-1 requires that filing companies provide information on the planned use of capital proceeds, detail their current business models and competition and provide a brief prospectus of the planned security itself, offering price methodology and any dilution that will occur to other listed securities. 

The S-1 details out how the direct listing would play out if approved:

“Once Goldman Sachs has notified Nasdaq that our shares of Class A common stock are ready to trade, Nasdaq will calculate the Current Reference Price (as defined below) for our shares of Class A common stock, in accordance with the Nasdaq’s rules. If Goldman Sachs then approves proceeding at the Current Reference Price, Nasdaq will conduct price validation checks in accordance with Nasdaq rules. As part of conducting its price validation checks, Nasdaq may consult with Goldman Sachs and other market participants (including the other financial advisors). Upon completion of such price validation checks, the applicable orders that have been entered will then be executed at such price and regular trading of our shares of Class A common stock on the Nasdaq Global Select Market will commence.”

Coinbase’s filling sparked attention and excitement around the cryptocurrency space. Traders on crypto futures exchange FTX.com bid FTX’s Coinbase pre-IPO contract up to over $435 following the announcement. 

A Glimpse Into The Bitcoin Userbase, Coinbase Earnings

Coinbase has been a significant player in onboarding North American users to bitcoin for years. As such, Bitcoin enthusiasts have been clamoring for details on Coinbase’s inner workings to better understand the size of the bitcoin market, among other things. To this point, Bitcoiners have frequently used Square’s quarterly earnings from its bitcoin sales through Cash App to better understand retail interest in bitcoin. But now that Coinbase is going public, it will be obligated, like Square, to disclose details around income, users and its treasury. 

“Today, our platform enables approximately 43 million retail users, 7,000 institutions and 115,000 ecosystem partners in over 100 countries to participate in the crypto economy,” Coinbase disclosed in the filing.

Coinbase’s filing also disclosed some of the company’s earnings details. It disclosed $1.1 billion in net revenue for 2020, up significantly from $282.9 million in net revenue for 2019.

Details On Coinbase’s Institutional Custody Acquisition

In 2019, Coinbase also saw its institutional volume officially flip retail volume, with the proportion of retail volume falling from 80 percent in Q1 2018 to 36 percent in Q4 2020, per The Block. Overall, both retail and institutional volume grew in the third and fourth quarters of 2020.

This emphasis on institutional volume may have stemmed from Coinbase’s acquisition of institutional cryptocurrency custody provider Xapo in 2019. More details about that acquisition were also released in this filing.

“The purchase consideration was comprised of cash and contingent stock consideration, which would be issued to the seller if certain conditions were met on the anniversary of the transaction,” per the filing. “This contingent consideration was accounted for as a liability measured at fair value, with subsequent changes in fair value being recognized in net income or loss. The total purchase consideration was $68.3 million, comprised of cash of $55.0 million, contingent consideration of $12.9 million, and direct acquisition costs of $0.4 million.”

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