Cryptocurrency exchange Coinbase is looking to take itself public through a direct listing, according to an announcement by the firm made late last week. Coinbase follows in the footsteps of tech companies such as Spotify (NYSE: SPOT) and Slack Technologies (NYSE: WORK) that have previously used direct listings to avoid the traditional initial public offering (IPO) process.
The fintech market is proving to be increasingly lucrative if the success of companies such as Lemonade (NYSE: LMND) and Bill.com Holdings (NYSE: BILL) are any indication. To make a Coinbase direct listing even more potentially lucrative, the company's plans are coming on the heels of bitcoin's 2020 rally, which saw it rise 300% over the course of the year, and coming amid a surge of activity by amateur investors, led by users of the subreddit r/WallStreetBets. Amid WSB's ongoing campaign to combat the short of GameStop (NYSE: GME) stock, traders also helped drive up the price of bitcoin.
Even though there's little aside from Coinbase's announcement so far, many are speculating about everything from how successful the company's listing will be to the potential share price and market value the company might reach. Speculation is, however, generally positive, with few experts or members of the press having bad things to say about Coinbase. Olaf Carlson-Wee, CEO of Polychain Capital, theorized that Coinbase was looking at a market value of $100 billion or more, while others are shooting for lower targets of $75-50 billion.
The choice to directly list rather than tack on underwriters makes sense given that Coinbase has existing investors whose shares they may not want to dilute. Of course, the decision could be a cost-cutting measure, as direct listing eliminates many of the fees that traditionally come with an IPO. Direct listing proceeds similarly to an IPO, except without outside underwriters assisting in the process.