- Coinbase contemplates issuing an exchange token to obtain more funds to the detriment of its Class A stock price.
- Among the risks to its business, Coinbase considers the discovery of Satoshi Nakamoto’s identity.
Crypto exchange Coinbase will be launching its Initial Public Offering (IPO) soon. Therefore, it has had to publish information related to its operations, business model, and potential associated risks in the S-1 document it has filed with the U.S. Securities and Exchange Commission (SEC).
The president of digital asset marketplace Bakkt, Adam White, has studied the document and discovered an interesting item “buried in the risk section.” There, Coinbase hints at the possibility of creating a native security token for its platform.
Via the token, the exchange could deploy a rewards and loyalty program to its customers, White reported. In addition, the tokens would serve as an additional source of funding available to the exchange to “support” the growth of its business.
The exchange believes that following regulations and complying with regulators’ rules will possibly create “substantially higher costs” for them than they have had in the past. The above could have an impact on the volatility of their Class A common stock, as the document filed with the SEC points out. The document states:
We also may issue our capital stock or securities convertible into our capital stock, including in the form of blockchain tokens, from time to time in connection with a financing, an acquisition, investments, pursuant to customer rewards, loyalty programs, and other incentive plans, or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the public price of our Class A common stock to decline.
The possibility of Coinbase issuing its own token is even more feasible considering that the exchange is already part of consortium CENTRUM. Together with its partner Circle, Coinbase has created this consortium to issue the stablecoin USD Coin (USDC), second only to Tether (USDT) in market capitalization.
Exchanges such as Binance, Gemini, OKEx, and others have their own tokens. However, none of these entities is a registered public company in the United States. White notes the following about the possibility of a Coinbase token:
Is Coinbase creating an exchange token? Maybe. Does the SEC consider these token types securities? Probably. Will be interesting to keep an eye on this space and how regulators and other exchanges respond.
Coinbase estimated value and Satoshi Nakamoto risk
Among other risks associated with fluctuations in Coinbase‘s stock price, the exchange considers the performance in the stock market, changes in its board of directors, speculative rumors, announcements of “significant innovations”, and among many others, the “identification of Satoshi Nakamoto“, the anonymous creator of Bitcoin.
If “Satoshi’s Bitcoin” enters the market, it could have a negative impact on the price and, consequently, Coinbase. In the document, the exchange states:
The future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate. If crypto does not grow as we expect, our business, operating results, and financial condition could be adversely affected.
The “Coinbase Pre IPO” stock is already trading at the derivatives exchange FTX. With the symbol CBSE and a starting price of $238, the stock has shown a strong performance and currently sits at $380.