What Does A Direct Listing Mean For Coinbase Investors?

Today’s the day of one of the century’s most hotly-anticipated market debuts as Coinbase goes public on the Nasdaq.

Many investors this morning must feel like Charlie did right before he entered the infamous chocolate factory, as Coinbase (NASDAQ: COIN) mania peaks ahead of its market debut later today.

But do investors know how it’s going public?

Coinbase is hot property!

The first thing that anyone thinking of buying Coinbase needs to know is that this is not an IPO but a direct listing. This is a process where the company does not create new shares for the public to buy. Instead, Coinbase will list its already existing stock as available to buy from pre-existing shareholders, such as employees, executives, and company insiders. 

A direct listing makes a lot of sense for Coinbase: 

  • It saves money by negating the need for expensive underwriters — banks who facilitate going public.
  • It removes any lock-up period where pre-existing investors cannot sell their shares within a set amount of time after going public. This can reduce volatility down the line. 
  • Coinbase does not need the free publicity that traditional IPOs generate. 

Of course, Coinbase is running the risk of volatility in the short-term as the value of its shares is purely dependent on market demand. However, I don’t think there’s going to be any shortage of buyers. In reality, the stars have aligned themselves very nicely for Coinbase’s big debut; it just announced that Q1 revenue increased to $1.8 billion, up from the $190.6 million in the same period in 2020, while both Bitcoin and Ethereum hit record highs yesterday. 

There are never sure things in investing though, and as highly-anticipated as this direct listing might be, there’s a chance that new investors might not fully understand what they’re getting into. If you’re considering buying COIN stock today, you should first read our report on the bull and bear cases for Coinbase.

A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!  

MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here