Investors always want to find the opportunity on the ground floor that will make them rich. Whenever a well-known and respected private company decides to go public, it creates a buying interest frenzy that often ends up bringing huge day one jumps in stock prices. As we have seen in 2020 with IPOs like Snowflake (NYSE: SNOW) and Airbnb (NASDAQ: ABNB), those who are able to enter IPO stocks directly from underwriters are making a huge profit. However, those who are left out have to pay high prices in the open market to get stocks.
Many companies are expected to go public in 2021, with many having already filed the necessary documents with the United States Securities and Exchange Commission. Companies like the logistics delivery platform Instacart, pet retailer Petco, and mobile investment app pioneer Robinhood are gaining a lot of attention from 2021.
But in my mind, there is one company that stands out above the rest. With its unique position in one of the hottest investment areas on the planet right now – cryptocurrency – Coinbase will be the only true must-have IPO stock for 2021.
How Coinbase is capitalizing on the cryptocurrency craze
Coinbase operates one of the most popular cryptocurrency exchanges in the US market. It allows people to buy and sell bitcoin and a wide range of other tokens, with a simpler interface for casual investors and a higher level Pro service for advanced traders.
In addition, Coinbase offers cryptocurrency wallets for those looking to hold their own cryptocurrency. Wallets allow Coinbase members to send and receive cryptocurrency to each other in an easy and secure way, with a relatively user-friendly interface that simplifies the process of moving crypto assets.
You don’t have to love Bitcoin to love Coinbase
If you’ve ever been shaking your head thinking bitcoin is the most dangerous investment there is, I understand. Many smart investors have jumped on the cryptocurrency bandwagon in recent months, but there is still healthy debate, and many see the whole crypto craze as a bubble that must eventually burst.
But here’s the problem: you don’t need to invest in crypto to love Coinbase. I have been for a long time Starbucks (NASDAQ: SBUX) investor, but I hate coffee. That hasn’t stopped me from making a lot of money on the coffee chain giant’s stock – and I can’t help but smile every time I walk past a Starbucks cafe with a long line of drug addicts on. 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 a transaction volume of $ 320 billion. Coinbase users have $ 25 billion in cryptocurrency assets on the platform. Additionally, Coinbase is a global company, with users in over 100 countries and over 1,000 employees.
Better yet, Coinbase charges a fee on every transaction made by its users. The company’s website says it charges a spread of around 0.5% on purchases and sales of crypto assets. On top of that, Coinbase charges a transaction fee of $ 0.99 to $ 2.99 on transactions up to $ 200, and a variable rate of 1.49% on purchases using a bank account or the Coinbase wallet. . A base rate of 4% applies to transactions that do not give the right to a partial waiver depending on the method of payment.
To be clear, professional traders don’t pay anywhere near these amounts, with a graduated fee schedule that allows some high volume traders to buy and sell cryptocurrencies at no cost at all. However, even traders who are not generating volume play the valuable role of creating liquidity for the Coinbase exchange, helping to establish a leadership role in the rapidly growing business.
A silent IPO
Usually, companies looking to go public have to give investors plenty of disclosures early in the process. However, Coinbase took advantage of recent rules allowing companies considering IPOs to file their draft registration statements confidentially. This is what happened in mid-December, with Coinbase tweeting about its submission to the SEC.
Coinbase has not speculated on when it will move forward with its IPO, only saying that it expects the S-1 registration filing to become effective once the SEC has completed. its review process. Exact time will be up to Coinbase to decide, although some believe the company could go public as early as February.
Until the IPO documents are released, investors won’t know for sure how lucrative Coinbase is. However, you can already see a few things that make it promising:
- Fee income of even a tiny fraction of $ 320 billion in crypto transactions is 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 beginner-friendly place to start.
- Coinbase’s fees are competitive compared to consumer-friendly businesses like PayPal funds (NASDAQ: PYPL) and Square (NYSE: SQ).
- Coinbase’s last private funding round was in 2018 and valued the company at $ 8 billion. This came after Bitcoin’s first massive bull run, but it happened after the cryptocurrency gave up a large chunk of its gains.
Keep your eyes on Coinbase
It is also possible that Coinbase will choose to go public using a direct listing instead of a subscribed IPO. If that happens, selling shareholders will be able to pocket more of the day one pop rather than giving it to the best on Wall Street.
Whether you love bitcoin or hate it, Coinbase gives you a chance to profit from it, no matter what happens to crypto prices. This will lead me to keep a close watch as 2021 continues to see what Coinbase says in its IPO documents when they are finally made public.