One of the biggest news in the crypto community right now is the Coinbase IPO. The company is all set to go public today via a direct listing on NASDAQ. And the reference price has been set to $250. This puts Coinbase at an evaluation of $50 billion and gives it a significant advantage over its competitors. The recent IPO has also been one of the speculated reasons for the non-stop rally of Bitcoin, Ethereum, and other popular coins. But didn’t we hear that Coinbase was evaluated at $100 billion? Then why this price? Let’s take a look.
[Update: COINBASE GLOBAL CLASS A SHARES OPEN AT $381 IN NASDAQ DEBUT VS REFERENCE PRICE OF $250 PER SHARE COIN]
Why is Coinbase’s share discounted?
This is called the reference price. Coinbase’s shares are at a discounted rate in order to compete better with the market. While setting a reference price, a company gives a good discount on the already advertised price. This is a very simple behavioral tactic played by the company in order to make users buy their products. So, by initially advertising a rate of around $350 and giving a reference price of $250, Coinbase is probably going to get a lot more sales.
This is the same tactic used by both online and offline shops. Most of the year, the prices are set to a particular amount, and so when they dip during sales, the first thing that comes to a consumer’s mind is the buy signal. This helps companies get more sales and, in turn, increase their profits even though the margins are less. This example is not completely exact of an IPO but most definitely a good example to understand what is going on.
Why is Coinbase IPO so important?
The company is the biggest crypto exchange in the US. And is also one of the major reasons for the participation of bigger companies in crypto investment. In just a few months of crypto popularity, Coinbase was able to hit a $100 billion market cap. It has even crossed Goldman Sachs in terms of evaluation which is quite a big deal. In fact, reports also suggest that the company will also include Tesla’s share in its platform. So, the company going public is a sign of normalization for cryptocurrencies.
Those who don’t want to invest in crypto directly but want to invest in its future can actually invest in Coinbase. If everything goes well, you surely are not going to make as much profit as investing in crypto directly, but the returns won’t be bad. Just to give you some perspective, the revenue of coinbase has increased by 847% in the 1st quarter of 2021. So, just think how much the revenue could rise when we see even more participation in crypto.
What are your thoughts on Coinbase going public real soon? And do you think they will do well in the open market? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.