Coinbase went public on April 14 riding a wave of global fanfare, excitement and hype. The company went public through a “direct” listing, which is slightly unusual and a bit riskier than a more traditional IPO. With a direct listing, there are no investment banks or pools of wealthy investors promising to create a market for the stock once it goes public. Instead the company’s shares are essentially just hoisted onto an exchange, in this case the NASDAQ, for investors to buy immediately at whatever price the market makes. Sometimes that works. Other times, not so much.
Unfortunately, Coinbase is teetering on the verge of “not so much.”
And in the process the net worth of CEO Brian Armstrong is getting obliterated.
Prior to the April 14 IPO, analysts predicted Coinbase’s stock price would land at around $250 when the direct listing was complete. That would have given the company a market cap of $65 billion.
Soon after debuting, the price hit $300. Then $350. Then $380. Then $400. Then, very briefly, $430.
At $430, the company’s market cap was $112 billion.
Company co-founder Brian Armstrong owns 20% of Coinbase’s outstanding shares. At $430 per share, Armstrong’s paper net worth was…
At that peak level, Armstrong was one of the 70 richest people in the world. He ranked in the same ballpark as former Google CEO Eric Schmidt, hedge fund king Carl Icahn and Laurene Powell Jobs (Steve Jobs’ widow).
Unfortunately, the good times did not last… so far.
Some might call crypto prices in the last 24-48 hours a blood bath.
On May 9, the price of Bitcoin was sitting at just under $60,000. On the morning of May 19, Bitcoin briefly sank all the way down to $30,000.
Ethereum’s price dropped 20% in 24 hours. Binance dropped 40%. Dogecoin dropped 20%.
All told, the entire cryptocurrency sector shed $1 trillion in value in a day.
On Wednesday, Coinbase’s share price briefly touched $208 before closing at $224. At $224 the company’s market cap is $47 billion.
At $224 a share, Brian Armstrong’s paper net worth is…
Obviously that’s still an impressive number. But it’s also a 60% drop. A paper loss of $13.4 billion in a month.
The major concern here is … what happens next?
If you listen to crypto bulls on Twitter this is just a blip. A dip. A buying opportunity that will make anyone with diamond hands even richer when prices roar back.
Skeptics on Twitter have been using the word “Ponzi” a lot in recent days. In fact, the word “Ponzi” was the #1 trend on Twitter half the day Wednesday.
I’m personally thinking about all the Bitcoin and Coinbase hype that felt so real mid-April and almost caused me to buy some Coinbase shares at the IPO. I ended up resisting, but I’m sure many more people jumped in eagerly.
Consider this –
If you invested $10,000 into Coinbase and Bitcoin on April 14, today you’d have $6,750. And I’m sure a lot of people did exactly that – perhaps with money they couldn’t really afford to lose.
Orrrr we could all wake up Thursday and Bitcoin will be at $60,000.