It seems cryptocurrency listing exchange Coinbase is choosing the dog days of summer for its first ever investor day August 14, with rumors swirling around a possible ICO or similar public play for the company.
“It is unclear … whether the virtual event is related to the rumored efforts to go public,” writes Brady Dale at Coindesk. “A Coinbase spokesperson confirmed the meeting is coming but said it was meant simply ‘to facilitate a wider understanding of cryptocurrencies and blockchain technology.’”
Valued at $8 billion, Coinbase is a significant player in the crypto exchange field known as a secure place to trade crypto coins. People with ears to the ground are suggesting that in going public, the firm may choose to pursue a direct listing rather than a traditional ICO.
Why not go with the ICO approach?
Like a traditional IPO, the ICO will often involve underwriting by an investment bank.
With that in mind, the direct listing seems to be, in a sense, the direct approach, and cuts out the middleman, to some extent.
Venture capital firms are looking more closely at direct listings in general for these and other reasons.
One rationale that is given for this change involves the idea that VC firms might not trust the banks in some ways.
“VCs believe that the underwriters, which in most cases are investment banks, price shares deliberately low so they can surge on the first day of trading,” writes an unnamed author at Capital.com. “The surge benefits the institutional clients who buy at the low initial offer price and then flip their shares when the price goes up. This underpricing of shares via IPOs means that companies receive less capital and early investors such as VCs see diminished returns. Research shows that in the past decade, VC-backed IPOs underwritten by Goldman Sachs had, on average, a 33.8 per cent first-day gain. Some VCs now believe it’s hard to justify giving away millions of dollars in one day. This means in the battle of direct listings vs. IPOs, we could start to see a new champion emerging.”
Pros who have seen this kind of trend at work might become some of the biggest cheerleaders of the direct listing, which has already been tried by a number of crypto firms. Stay tuned for more on what happens with Coinbase.