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Distroid is hosted and written by the Ledgerback Digital Commons Research Cooperative (LDCRC) members and contributors (“community”). Distroid covers the internet and society, with a focus on alternative internet-based communities, projects, and resources, which I refer to as the Polyverse.
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$COIN: Blockbuster or Netflix?
This past month, Coinbase held a direct listing (not an Initial Public Offering (IPO)) on the Nasdaq exchange. Noelle Acheson in Coinbase ‘IPO’ Isn’t an IPO. Here’s Why That’s Important describes some of the differences between a direct listing and an IPO below:
IPO shares get allocated at a pre-established price; direct listing shares do not.
IPOs raise new capital, direct listings do not.
In theory, IPOs are less volatile in initial trading than direct listings, for three reasons:
They do not count on the support of large institutions, which in an IPO would commit to buying a certain size tranche. These institutions would then have a face-saving and economic incentive to keep the price above their commitment level.
In an IPO, existing shareholders typically have a lock-up of 6-12 months, during which they cannot dump their shares on the market. A direct listing does not have a lockup, as it is based on shareholders selling their holdings. (There are exceptions, such as Palantir, which imposed its own lock-up that limited insiders to selling 20% of their holdings. The share price slumped the day the lockup expired.)
The sellers of Coinbase shares in a direct listing (existing shareholders) do not have to sell their shares. Some may wait to see how trading is going before submitting their offers, which will affect the number of shares being traded and could exacerbate price swings. Coinbase has registered 114,850,769 shares eligible for sale – but we do not yet know how many shares will actually change hands Wednesday. It could be significantly less.
IPOs are cumbersome, involving expensive roadshow tours to present the company to institutional investors, and higher investment banking fees.
Some say this is landmark moment for the cryptocurrency industry because Coinbase is one of the largest exchanges in the industry, and Coinbase is the first cryptocurrency exchange to go public.
You can find Coinbase’s filings with the Securities and Exchange Commission (SEC) here if you like looking into the securities side of things.
Landon Manning in Coinbase IPO Exceeds All Expectations, Showing More Promise For Bitcoin describes some of Coinbase’s upsides in the quote below:
Analysts have laid out the fundamentals behind this quite succinctly:
it is the most popular cryptocurrency exchange,
it’s never been hacked, which gives it a reputation of security,
it has more than 10 percent of all bitcoin and other cryptocurrency in existence squirreled away on its platform, and
it’s got an abnormally high profit margin that’s only looking rosier as time goes on.
Stories
Coinbase IPO Exceeds All Expectations, Showing More Promise For Bitcoin
Crypto Exchange Coinbase Could Be Worth $100 Billion After IPO
Coinbase Direct Listing (Formerly IPO): Everything You Need To Know
News
Uber and Lyft are spending millions to woo drivers back to their apps
How the Ownership Economy Could Make Internet Platforms Work for Everyone
Contests
Events
Questions
Do you think Coinbase will end up becoming the new Blockbuster or Netflix?
Contact and Sponsorship
Author: Charles Adjovu, LDCRC
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