Crypto Analytics

As Coinbase Stock Plunges, Crypto Exchange Prepares to Raise Funds for Insurance

  • Coinbase stock fell 26% on Wednesday after missing out on Tuesday’s gains
  • A shelf registration allows a company to register a new issue of securities in the form of primary or secondary offerings

coin base filed a shelf registration statement with the SEC preparing for a potential fundraising or debt issuance as the crypto exchange’s shares continue to float, erasing billions of dollars in shareholder value.

A shelf registration allows a company to register a new issue of securities in the form of primary or secondary offerings. Since Coinbase has taken the direct listing route, it didn’t raise any additional debt in its 2021 IPO.

“While we have no immediate plans to offer securities at this time, by filing the shelf registration statement we will now be able to offer and sell securities in the future should we choose to do so,” Coinbase wrote in a blog entry Tuesday.

The filing’s mandate is fairly broad, according to Michael Miller, an equity analyst at Morningstar Research, because it covers common stock and preferred stock, as well as debt issuance, and leaves Coinbase multiple options to raise capital relatively quickly if executives pull that lever.

Coinbase reported revenue of $1.17 billion in the first quarter, missing analyst estimates. Shares plunged 26% on Wednesday.

Total trading volume for the first quarter was $309 billion, down 44% from the fourth quarter, which the exchange attributed to market conditions.

While Coinbase has $6 billion in cash and another $1.3 billion in crypto holdings on its balance sheet as a buffer in a down market, Miller said, the filing puts Coinbase in a position to quickly enter capital markets access when its core businesses continue to face such strong headwinds.

The exchange, like its peers, has worked to diversify its revenue streams away from its bread-and-butter trading fees — which have fallen as new exchanges have launched — and into other money-making ventures. Efforts so far have been mixed at best.

“With Coinbase slipping out of profitability, they may struggle to issue debt at an attractive interest rate without cryptocurrency markets recovering,” Miller said. “This makes the issuance of additional stock, common or preferred, more likely than new debt, in my opinion.” However, at the moment it is unclear whether they will do both.”

Coinbase’s Q1 earnings report also includes a new disclosure that clarifies that customers’ assets are not protected for a refund should the exchange go under. The exchange currently custodians $256 billion in fiat currency and digital assets.

“In the event of bankruptcy, the crypto-assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings, and those customers could be treated as our general unsecured creditors,” Coinbase wrote in the first quarter result report Tuesday.


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The post As Coinbase Stock Drops, Crypto Exchange Preps Insurance Capital Raise is not financial advice.

Source: Crypto News Austria

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