Coinbase Opts out of IPO Routine, Chooses Popular Direct Listing Route

The San Francisco-based cryptocurrency exchange Coinbase recently announced the company plans to do a direct listing, as opposed to following the initial public offering (IPO) route. The decision means that Coinbase can float its shares on an exchange without hiring a financial institution to underwrite the settlements.

Coinbase to Skip IPO Process, Shoots for a Direct Listing

Just recently people familiar with the matter received a tip that the exchange giant Coinbase had plans to sell shares privately ahead of the IPO. In mid-December, Coinbase revealed the confidential filing of an S-1 initial public offering with the U.S. Securities and Exchange Commission.

However, on January 28, 2021, Coinbase announced a proposed direct listing as opposed to the IPO that was initially planned. For instance, a few weeks prior rumors spread that Goldman Sachs would be the exchange’s underwriter.

On Thursday Coinbase wrote:

Coinbase Global, Inc. today announced its intent to become a publicly-traded company pursuant to a proposed direct listing of its Class A common stock. Such proposed listing is expected to be pursuant to a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”).

Crypto Proponents See ‘Strong Market Demand’ for Coinbase Shares

Of course, the crypto community started speculating on why Coinbase decided to opt for a direct listing instead of an IPO. James Todaro, MD, partner at Greymatter Capital explained a few reasons why he thinks Coinbase chose this path.

“Possible key reasons,” Todaro tweeted. “Strong market demand/no help needed generating liquidity, [and] no lock-up for early investors (can sell shares immediately). I think early investors see imminent market euphoria,” Todaro added.

Moreover, a direct listing seems to be the popular route these days to some companies rather than IPO. The popular video game company Roblox opted to choose a direct listing and several others are choosing to debut on public equity markets.

Coinbase will be able to jump over the components of an IPO by floating shares without any intermediaries. The San Francisco-based crypto company can sell shares directly to the public without dealing with marketing new equity and the need for investment banks to underwrite transactions.