Discovering Coinbase IPO documents: P/E ratio or above 300, A16Z, USV as the biggest institutional winners

On February 25, Coinbase officially announced that it would launch a new serviceSECTo file an application to list its Class A common stock directly on the NASDAQ Global Select Market under the ticker symbol"COIN", Goldman Sachs, Citigroup, J.P. Morgan and other firms acted as transaction advisers. If approved, Coinbase would be the first head crypto to list on traditional capital marketscurrencyexchange"And became a landmark event in the crypto industry.

For years, Coinbase has been considered one of the most influential players in the cryptocurrency market. Although it is not the largest exchange in terms of trading volume, it has been recognized by many in the industry for its compliance and professionalism, so its plans to go public attracted a lot of attention when it was announced. Currently, Coinbase is expanding beyond its core trading business into asset custody, crypto payments, and riskinvestmentAnd many other businesses.

With the release of Coinbase's S-1 filing with the SEC, a slew of details about the company's financial health and performance were revealed. In order to further analyze the development status of Coinbase, Chain Catcher conducted a detailed study and analysis of the S-1 file of Coinbase, extracted important information points and organized them into a paper. Specifically, the following contents can be seen:

Financial data

According to the filing, Coinbase reported total revenue of $1.277 billion in 2020, up 128 percent from 2019, with net income of $322 million and net income per share attributable to common shareholders of $1.58, compared to a net loss of $30.4 million for the full year of 2019.

In terms of revenue sources, about 85.8% of Coinbase's revenue comes from customer transaction fees; About 3.5% of revenue comes from subscription and service revenue, which is mainly the custodian fees paid by customers; About 10.6 percent of the revenue came from other sources, mainly from using crypto assets Coinbase holds to help customers complete transactions during an unexpected outage of its trading system, according to the filing.

In terms of operating expenses, the largest component was general administrative expenses, which amounted to $279 million, representing a 20 per cent increase over the previous year; Followed by technology and development at $271 million; Transaction costs, dominated by miners' fees, were $135 million, up 64% from the previous year; Sales and marketing expenses were $56.78 million, a 135% increase over the same period last year.

As of December 31, 2020, in not calculatedUSDCIn the case of total value, Coinbase holds crypto assets with a total value of $187.9 million (total cost of $62.3 million), of whichBTC69% of the value (about 4,550 pieces) is used for investment and operational purposes.

DeFiance Capital"People in the beginning, Arthur Commenting on this, Coinbase, one of the most traded exchanges, has a surprisingly small amount of cryptocurrency on its balance sheet.This may have something to do with the way Coinbase handles its fee assets, according toS-1The document explains that the company regularly checks the balance of the fees it collects in the form of crypto assets on a daily basis, converting the amount above $100 into fiat to reduce market risk, and only converting the amount below $5,000 if found to be above $100.

As of December 31, 2012, Coinbase had cash and cash equivalents of $10.62 billion, total assets of $58.55 billion, total liabilities of $48.29 billion, and total shareholders' equity of $9.63 billion. The total number of employees is 1,249, of which more than 40% are engineering, product or design.

Coinbase's stock token, which is currently trading on the FTX exchange at $408, values the company at $102 billion based on Coinbase's S-1 filing of 250 million common shares, which implies a staggering 316 times earnings.

But considering The encryption market this year is more hot and Coinbase trading performance so far in January, The research director Larry Blclok Cermak tweet, points out that Coinbase trading volume in The first quarter of this year is expected to reach $362.6 billion, or four times in The fourth quarter of last year, The resulting fee income of about $2.44 billion, which will also bring more support for Coinbase valuation.

Trading business information

Coinbase inS - 1 filesIt also details user and transaction data in recent years. Coinbase had 43 million certified users as of December 31, 2020, an increase of 34% from end-2019 and 87% from end-March 2018. For all of 2020, Coinbase's cryptocurrency trading volume was $193 billion, up 141.7% from 2019.

Coinbase held a total of $90.3 billion in fiat and cryptocurrencies on behalf of its customers as of December 31, 2020, up 432.2% from a year earlier, of which cryptocurrencies accounted for $86.8 billion, or 11.1% of the total cryptocurrency market capitalization. The data also showed that BTC,ETHBTC and ETH accounted for 41% and 15% of Coinbase's total trading volume, while the rest accounted for 44% of Coinbase's total trading volume.

Notably, Coinbase's data shows that retail users accounted for 36% of transactions in the fourth quarter of 2020, while institutional users accounted for 64%. In the first quarter of 2018, retail users accounted for 80% of transactions, while institutional users accounted for only 20%. This figure fits with the prevailing narrative that the crypto boom of 2020 will be dominated by institutional traders.

Coinbase averaged 2.8 million monthly active trading users in the fourth quarter of 2020, up approximately 180% from the fourth quarter of 2019, but averaged 2.7 million monthly active users in the first quarter of 2018, or roughly flat.

Currently, Coinbase supports users to trade over 45 crypto assets and to host over 90 crypto assets. The company also indicated that it has applied to operate the Alternative Trading System AST in the United States, thereby allowing the platform to support what is considered under the U.S. federal securities laws"securities"Crypto assets, but have not yet been approved by regulators.

Shareholders, investments and vision

Combined with Class A and Class B common shares outstanding as of January 31, Coinbase's largest shareholder is founder and CEO Brian Armstrong, accounting for 20.7 percent. The second largest shareholder isa16zRelated entities, accounting for 15.4%; The third largest shareholder is United Square Ventures (USV) related entities, accounting for 7.2%; The fourth largest shareholder is Ribbit Capital with 6.2 per cent, while Tiger and Paradigm each hold about 1 per cent.

Because Coinbase went public directly, there was no lock-up period for all of its shares, meaning early employees and investors could sell immediately,CoiNBase also warned in the filing"Existing registered shareholders may sell their shares of their Class A Common Stock in the short term, resulting in an oversupply of Class A Common Stock and having an adverse impact on the price."

Of particular concern is Coinbase founder Brian Armstrong's total compensation in 2020 of nearly $60 million, including a $1 million salary and $56.7 million worth of fair-value stock grantsoptions, and about $1.8 million"personalsecurityspending"Compensation.

In its S-1 filing, Coinbase also said it has invested a total of $26.14 million in more than 100 companies in recent years, with an average investment of less than $260,000CompoundLabs invested $200,000, Amber Global invested $150,000 in January 2010 and Arweave invested $300,000 in February 2010. The company is also expected to make a good profit, given the recent surge in tokens for many of Coinbase's investments.

Coinbase also disclosed specific prices for its past three acquisitions.1In January 2009, he acquired Blockchain Intelligence for $6.4 millionNeutrino; In August 2019, it acquired the Xapo institutional hosting business for $68.3 million;In July 2010, he bought cryptocurrency brokerage Tagomi for $41.8 million.

According to Coinbase, the company is weaving a large fabric through its extensive proprietary business and investment portfolioThe crypto ecosystem is designed to be based on cryptofinancialThe service is available to anyone with a smartphone, becoming the first and main entry point to the crypto economy for 3.5 billion smartphone users.

"Crypto economy will be in the next few yearsIt went mainstream within a decade and reached everyone and businesses around the world."Coinbase said," encryption technology may like Internet revolutionary and widely used. The unique attributes of encryption assets will be positioned value stored digital alternatives such as gold, so that they can create a financial system based on Internet, and for the application to provide development platform can't imagine today. These markets and informationThe category collectively represents today's multi-billion dollar value."

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