Kraken reconsiders direct listing plan following lackluster performance of Coinbase

Jesse Powell is reconsidering Kraken’s plan to go public, which is scheduled for late 2022, following the uninspiring performance of Coinbase (COIN) stock since its launch on April 14.

Speaking to Fortune on June 11, Powell stated that in light of Coinbase’s direct public offering performance, the company is now considering one more initial public offering (IPO) “now” as the company seeks to avoid potential problems from direct way. listing presents:

“Not having locks, having billions of dollars of insiders who can ditch their stock, you know, day one […] I think it 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 ​​going public in March, following Coinbase’s plans to seek a direct listing on the Nasdaq.

Powell then followed that up in April with a timeline suggesting that the company was looking to go public sometime in 2020, telling Cointelegraph that its public listing would be “too big” to go through the route of a company of special purpose acquisitions (SPAC). .

Related content: To IPO or not to IPO? SPAC is the question

The roadmap is still not entirely clear, and Powell stated in the Fortune interview that “we will see what the market looks like in the second half of next year” before deciding which method to take to go public.

“That is something we are aiming for. Hopefully by then we will have more analyst coverage and there will be more growth history for the industry, “he said.

Coinbase’s COIN stock launched with a price of around $ 327 on April 14 and, despite the enthusiasm that led the firm to go public, its performance has been disappointing, declining around 32.4% from to $ 221 starting today. according to TradingView data.

During the interview, Powell pointed out that COIN’s lackluster performance may be due in part to anti-crypto sentiment maintained in traditional finance and Wall Street. The Kraken CEO believes that there are many players who “actually have a lot to lose” from the success of cryptocurrencies, predicting that many players will resist “as long as possible,” noting that:

“I think you may be looking at people who are simply facing this cognitive dissonance of becoming increasingly aware of the impending doom for the legacy financial system.”

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

“We do not see a structural barrier to entry here and therefore we expect significant price degradation over time, with growth in non-transactional revenues that will hardly offset this.”

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

“We consider it unlikely that in the long term retail clients will happily continue to pay a transaction fee of more than 1%, particularly if / when trusted financial institutions start offering operations and custody,” the analyst noted.

Raymond James has rated COIN as “underperforming,” which is the label the company gives to assets it expects to underperform the S&P 500, or its sector, within the next six to 12 months and should be sold. .

Powell was also asked whether going public 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 Cointelegraph:

“It might have been possible a few years ago, but today I think we are too big to really consider doing a SPAC. So we are still on the way to going public. “