Investors always want to find the opportunity that will make them rich. Whenever a well-known and respected private company decides to go public, it creates a frenzy of buying interest that often ends up bringing huge increases in stock prices on the first day. As we saw in 2020 from seething IPOs like Snowflake (NYSE: SNOW) and Airbnb (NASDAQ: ABNB), those who can obtain IPO shares directly from subscribers make a huge profit. Those who remain outside looking inward, however, have to pay premium prices on the open market to obtain shares.
A number of companies are likely to go public in 2021, and many have already filed the necessary paperwork with the United States Securities and Exchange Commission. Companies such as the delivery logistics platform Instacart, pet retailer Petco and pioneer in mobile investment apps Robinhood are getting a lot of attention in 2021.
But, in my opinion, there is one company that stands out from the rest. With its unique position in one of the hottest investment areas on the planet at the moment – cryptocurrency – Coinbase will be the only truly mandatory IPO stock for 2021.
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How Coinbase is profiting from the cryptocurrency craze
Coinbase runs one of the most popular cryptocurrency exchanges on the United States market. It allows people to buy and sell bitcoins and a wide range of other tokens, with a simpler interface for casual investors and a high-level Pro service for advanced traders.
In addition, Coinbase offers cryptocurrency wallets for those looking to maintain their own cryptocurrency. Wallets allow Coinbase members to send and receive cryptocurrencies to each other in an easy and secure way, with a relatively friendly interface that simplifies the process of moving cryptographic assets.
You don’t have to like bitcoin to like Coinbase
If you’re already shaking your head thinking that bitcoin is the most dangerous investment of all time, I get it. Many smart investors have entered the cryptocurrency movement in recent months, but there is still a healthy debate, and many see all the crypto madness as a bubble that has to burst eventually.
But here’s the catch: you don’t have to invest in cryptography to like Coinbase. I’m an old one Starbucks (NASDAQ: SBUX) investor, but I hate coffee. That didn’t stop me from making a lot of money from the stock giant’s stock – and I can’t help but smile whenever I pass a Starbucks coffee shop with a long line of caffeine addicts waiting to shell out a few dollars for their daily latte.
Coinbase is in the same position. The exchange already has 35 million verified users, with US $ 320 billion in turnover. Coinbase users have $ 25 billion in cryptocurrency assets on the platform. In addition, Coinbase is a worldwide company, with users in more than 100 countries and more than 1,000 employees.
Best of all, Coinbase collects fees on every transaction its users make. The company’s website says it charges a spread of about 0.5% on purchases and sales of crypto assets. In addition, Coinbase charges a transaction fee of $ 0.99 to $ 2.99 for transactions up to $ 200, and a variable fee of 1.49% for purchases using a Coinbase bank account or wallet. A basic rate of 4% applies to transactions that do not qualify for a partial exemption based on the payment method.
To be clear, professional traders do not pay even close to these amounts, with a graduated fee table that allows some high-volume traders to buy and sell encryption without fees. However, even non-volume traders fulfill the valuable role of creating liquidity for Coinbase’s foreign exchange, helping to establish a leadership role in the fast-growing business.
A secret IPO
Typically, companies that want to go public have to give investors massive disclosures early in the process. However, Coinbase took advantage of the recent rules that allow companies considering IPOs to file their registration statement minutes confidentially. It happened in mid-December, with Coinbase tweeting about its SEC filing.
Coinbase did not speculate when it would proceed with its IPO, only saying that it expects the S-1 registration application to take effect as soon as the SEC completes its review process. It will be up to Coinbase to decide the exact moment, although some believe that the company may go public in February.
Until the IPO documents are released, investors will not be sure how profitable Coinbase is. However, you can already see some things that make it promising:
- Commission revenue of even a small fraction of $ 320 billion in crypto transactions represents a lot of money.
- The bitcoin boom has more investors than ever looking for ways to trade cryptocurrencies, and Coinbase has established itself as a friendly place for beginners to start.
- Coinbase rates are competitive with consumer-oriented companies, such as PayPal Holdings (NASDAQ: PYPL) and Square (NYSE: SQ).
- Coinbase’s most recent round of private financing came in 2018 and put a $ 8 billion valuation on the company. This came after the first massive bitcoin run, but it came after the cryptocurrency gave up much of its earnings.
Keep an eye on Coinbase
It is also possible for Coinbase to choose to go public using a direct listing instead of a subscribed IPO. If that happens, the selling shareholders will be in a position to pocket more of the first day’s pop, rather than give it to the best of Wall Street.
Whether you love or hate bitcoin, Coinbase gives you a chance to profit from it, no matter what happens with crypto pricing. This will make me follow closely as 2021 proceeds to see what Coinbase says in its IPO documents when they finally go public.