Coinbase is the first U.S.-based exchange to obtain a green light for the direct listing of its shares. COIN will begin trading on NASDAQ this Wednesday.
The pre-market tokenized version of the stock is trading at a $140 billion valuation on FTX. The value is two times higher than the New York Stock Exchange (NYSE) and six times more than the NASDAQ’s valuation.
The PE ratio of a company measures the number of times market price is valued compared to earnings per share. Rudimentary calculations suggest that Coinbase’s PE is somewhere between 90-120.
The PE ratio based on Q1 returns of Coinbase also suggests that the stock could be overvalued. Exchanges like NASDAQ and Intercontinental Exchange (parent company of NYSE) operate at a price-earnings (PE) ratio between 25-30, and PayPal’s PE ratio is around 75.
Huge Profits Could Justify “Overvalued” Stock
On the other hand, Coinbase is profitable in an industry where many startups are not, with nearly 4 times the profit margin of the NASDAQ and a similar margin to PayPal. Jeff Dorman, a CFA and Chief Investment Officer of Arca, commented on Coinbase’s “massive” profits.
“38% of tech companies are unprofitable today, higher than the 36% at the tech bubble’s peak in March 2000. Yet, every headline I read is about how overvalued Coinbase $COIN is (despite massive profits) and how crypto is in a bubble.”
Moreover, according to Matt Hougan, chief investment officer at Bitwise Asset Management, Coinbase’s listing is “going to force traditional finance to wrestle with the phenomenal growth in the crypto industry.” He told CNBC this morning,
“I think we’re going to see a gold rush for crypto equities as investors realize just how fast the ‘picks and shovels’ companies of the crypto ecosystem are growing.”
ETF investors such as ARK Fintech Innovation ETF (ARKF) and the Global X FinTech ETF (FINX) are considered likely to buy COIN, and
It’s the same story with Christian Magoon of Amplify, the operator of Transformational Data Sharing ETF (BLOK), has confirmed that his ETF will be adding it as well.
Bitcoin ETF applications continues to compile with the U.S. securities regulator. Today, Galaxy Digital Funds LLC, a Canadian asset management firm, became the ninth firm to file for a Bitcoin ETF.