Coinbase’s current rumored valuation is around $ 100 billion. However, according to Wall Street veteran David Trainer – CEO of securities research firm New Constructs, the number is “too high”.
Prior to the upcoming live listing, Coinbase’s private trading indicated the implied market value for the exchange to $ 100 billion. Trainer says that given the growing competition in the market, both Coinbase’s current market share as well as Coinbase’s profit margin will look sustainable in the crypto market that is and continues to grow into the future.
However, he argues that Coinbase pricing is based on sentiment, rather than fundamental analysis.
“I think Wall Street doesn’t want people to have any form of exact price discovery other than the more deceptive theory that allows them to sell assets, especially during the bubble period at unreasonable prices. their basic rules.
A profitable year for Coinbase
According to a report published by New Constructs, Coinbase stands out from recent IPOs (initial public offering) because the company has actually made a profit in the past fiscal year.
Citing Bloomberg, the report notes 85% of companies that were publicly listed last year were unprofitable. However, Coinbase’s $ 322 million return as shown in the recent S-1 filing created a positive wave for corporate and stock investors.
But according to Trainer, optimism about the broader crypto industry – in which Coinbase plays a key role – has fueled the sentiment for the company’s shares that are largely unfounded.
Furthermore, Trainer suggests that this kind of bubble has happened before, in industries like aerospace and auto manufacturing.
“The early days of those inventions had a lot of fanfare and overvaluation of so many companies, but in the end, only a handful of them survived and the actual valuation dropped.”
And just like those markets, which were once in their infancy, the crypto exchange market is still immature.
The mature cryptocurrency market
According to Trainer, share prices must certainly match the costs of their competitors living in a mature market – something the current crypto exchange market doesn’t have.
In the New Constructs report, investors are advised not to buy Coinbase stock “anywhere close to the rumored level.”
Trainer may not be optimistic about Coinbase stock, but he did say there is a difference between stocks and company.
According to Trainer, there is no evidence that Coinbase’s current value will be there forever. “There is a difference between a good company and a good stock,” Trainer said, adding that nothing in the company’s current structure suggests they have some secret technology advantages. allowing the company to stay ahead of competitors.
Of course, those competitors (Kraken, Binance, Gemini and Bitstamp) are watching Coinbase’s listing with particular interest. Trainer said:
“They are considering filing S-1. Like every other private equity company in the world, they see a profit and they want a share”.