Kraken rethinks its direct listing plan following poor Coinbase performance

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Jesse Powell is rethinking Kraken’s plan to go public which is slated for late 2022, following the interest-free performance of Coinbase (COIN) stock since its launch on April 14.

Speaking to Fortune on June 11, Powell said that in light of the performance of Coinbase’s direct public offering, the company is now considering an initial public offering (IPO) more “seriously now” as the company seeks to avoid potential problems the ad presents:

“Not having a lock-up, having billions of dollars of insiders who can sell their shares, you know, on day one […] I think this has a moderating effect on the market.

“And, you know, the IPO is just a very different process,” he added. Kraken began discussing the idea of ​​a public listing in March, following plans by Coinbase to pursue a direct listing on the Nasdaq.

Powell then followed that up in April with a timeline suggesting the company was potentially looking to go public sometime in 2020, and told TUSEN that its public listing would be “too high” to go through the path of a company of special purpose acquisitions (SPAC).

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The roadmap is still not entirely clear, Powell saying in the interview with Fortune that “we will see what the market looks like in the second half of next year”, before deciding which method to adopt for a quote. public.

“That’s kind of where we’re aiming. You know, I’m hoping by then we’ll have more analyst coverage and there will just be more growth history for the industry, ”he said.

Coinbase’s COIN stock was launched with a price of around $ 327 on April 14, and despite the enthusiasm that led to the company’s IPO, its performance has been disappointing – declining by around $ 32. , 4% since to $ 221 to date, according to data from TradingView.

During the interview, Powell noted that COIN’s poor performance may in part be due to anti-crypto sentiment from mainstream finance and Wall Street. The Kraken CEO believes there are a lot of players who actually “have a lot to lose” from the success of crypto, and predicted that a lot of players will resist it “for as long as possible”, noting that:

“I think you might see people just going through this cognitive dissonance of becoming more and more aware of the looming doom that lies ahead for the old financial system.”

Patrick O’Shaughnessy, analyst for Raymond James, an independent investment bank with a net worth of $ 17.76 billion, said in a note to clients regarding COIN on June 10 that:

“We don’t see a structural barrier to entry here so we expect significant price degradation over time as non-transaction revenue growth struggles to compensate for this.”

From O’Shaughnessy’s perspective, Coinbase is too reliant on transaction fees to generate revenue and expects the market to offer cheaper alternatives in the near future.

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“We believe it is unlikely that in the long term, retail clients will happily continue to pay a 1% + transaction fee, especially if / when trusted financial institutions start offering trading services. and on call, ”noted the analyst.

Raymond James classified COIN as “underperforming,” which is the label the company gives to assets that are expected to underperform the S&P 500, or its sector, in the next six to 12 months and are expected to be sold.

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Powell was also asked whether the IPO through a Special Purpose Acquisition Company (SPAC) would be an option for the crypto exchange, and he reaffirmed the views he had previously expressed to TUSEN:

“Maybe it was possible a few years ago, but today I think we’re too big to really consider doing a PSPC. We are therefore still on the right track for a public registration.