San Francisco-based cryptocurrency exchange Coinbase recently announced that the company plans to do a direct listing, as opposed to following the initial public offering (IPO) route. The decision means that Coinbase will be able to trade its shares on an exchange without hiring a financial institution to insure the settlements.
Coinbase to skip IPO process shoot for direct offer
Recently people have become familiar with the matter got a tip that the stock market giant Coinbase had plans to sell shares privately prior to the IPO. Mid-December, Coinbase disclosed the confidential filing of an S-1 IPO with the United States Securities and Exchange Commission.
However, on January 28, 2021, Coinbase announced a proposed direct listing as opposed to the IPO originally planned. For example, a few weeks earlier, rumors had circulated that Goldman Sachs would be the underwriter of the exchange.
On Thursday, Coinbase wrote:
Coinbase Global, Inc. today announced its intention to become a publicly traded company under a proposed direct listing of its Class A common shares. Such proposed listing is expected to be based on a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”).
Crypto advocates see ‘Strong market demand’ for Coinbase stocks
Of course, the crypto community began to speculate as to why Coinbase decided to go for a direct listing rather than an IPO. James Todaro, MD, partner at Greymatter Capital explained a few reasons why he thinks Coinbase chose this path.
“Possible main reasons,” Todaro tweeted. “Strong market demand / no assistance needed to generate liquidity, [and] no lock up for early investors (can sell shares immediately). I think early investors see an impending euphoria in the market, ”added Todaro.
In addition, direct listing seems to be the popular route for some companies instead of IPO these days. Popular video game company Roblox opted for a direct listing and several others choose to debut in the public stock markets.
Coinbase can jump over the components of an IPO without intermediaries through floating stocks. The San Francisco-based crypto firm can sell stock directly to the public without bothering to market new assets and the need for investment banks to underwrite transactions.
How do you feel about Coinbase choosing to go for a direct listing instead of an IPO? Let us know what you think about this topic in the comments below.
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