Coinbase CFO Just Dumped 100% of His Stock and the CPO 97%. What Do You Think This Means?
By L. Sebastian Purcell
It’s not as bad as you might think. It doesn’t express doubt in Coinbase as a company so much as doubt that the cryptocurrency bubble will last. Let me explain in three points.
A variety of news outlets are reporting that the C-Suite dumped their shares and that the sky is falling, and the crypto market is going to crash!!! Watch out!! The insiders know and it’s all coming to an end!!
Here’s the actual link to the SEC’s page that has the filings. You can read them for yourself.
Three things actually happened.
- Venture Capitalists who were early investors in Coinbase, including Andreessen Horowitz, took their profits.
- Various C-suite members, including the CEO, transferred their shares into trusts.
- Members of the C-suite took earnings too.
#2 What Do Those Actions Mean?
Well, with respect to point 1, this means nothing. Of course, venture capitalist firms took their earnings. They focus on bringing small firms into existence and then hope to bring them to a public offering. That’s their business model.
Once a company goes public, a VC firm has “won.” So, they take their profits and then go invest in another company.
With respect to point 2, that means that the CEO is hoping to shield himself from liabilities. As the CEO, he might be held personally responsible for whatever Coinbase does. And when investors lose money, and some obviously will, it’s just a fact that some law firm is going to try to make money by suing someone.
By moving his shares into a trust, he is shielding them from lawsuits. He is noted as a beneficiary of those trusts, however, and that’s why he has to declare them with the SEC.
With respect to point 3, this means that the C-suite members think that Coinbase’s revenue will drop dramatically when the Bitcoin bubble crashes. Coinbase makes money when people buy and sell cryptocurrencies, and when a bubble pops, the number of transactions drops by up to 80%.
That will represent a huge decline in revenue for Coinbase. And since its future price is based on revenue growth, that would be devastating for share price.
But, none of that is a prediction that the bubble will pop soon. Had they gone the traditional IPO route, the C-suite would have their shares locked up for probably 6 months, and they decided not to go that route in part because they do not know whether the bubble will continue for that long.
If you could for sure earn $150 million today, or maybe $200 million 6 months from now with a significant possibility that it might only be $80 million, what would you do?
Of course, the C-Suite went for the first option.
#3 So, What’s the Upshot?
It’s notable that the CEO didn’t sell all his shares, which indicates that he does think there is long term potential for the company. He also has preferred shares that he can convert into B, then A class shares still.
The upshot is simple: Coinbase share price will trade in line with Bitcoin. It’s a leveraged bet on the Bitcoin bull market. We don’t have a lot of history, but I imagine that it might do 2x whatever Bitcoin does.
As long as Bitcoin’s price action stays positive, say above the 160-day simple moving average, Coinbase is likely to continue to make money.
That’s why Cathy Wood, who manages $ARKK, bought a lot of $COIN. I was hoping for a nice sustained Bitcoin dip (in the -20% range) to buy some myself.
Followers of my newsletter will know when I actually buy-in, but that’s still my plan. $COIN is a bet on Bitcoin, not a value investment. So, the C-suite selling out doesn’t tell you very much that’s useful.
Here’s what others had to say:
CYA is the name of the game. Period. Thanks for this detailed response.
When did Quora become medium.com? I am not against crypto and have some proof of stake but lately I feel the Quora emails spin articles which seem one sided.
Could partly be that they realize that stockholders will eventually figure out what absolute SHIT coinbase support is. No human you can talk to. Ask a question via their interface and about 3 weeks later you will get an anwswer to somebody else’s question. Ask them what the hell their answer had to do with your question and you will ge an answer to yet someone else’s question. Try asking again via a new message. Ditto after a few weeks. Heaven forbid their software actually makes a transaction error (oh, and while most financial trading platforms requires verification before a trade is done…not so with coinbase. Enter a value and hit enter and the trade is done…better hope you had the value right…I know I have lost a few thousand $$$s thanks to that hit enter and it trades without confirmation.
With respect due to a philosopher giving financial advice (read:NONE), you don’t know what you are talking about. Bubble? Check back in a couple years. You’ll wish you had understood BTC better than you currently do. On your ‘useless’ PC on the ‘fad’ internet.
You make good points.
Still, they are human, and if they believed they could make more money in the future then now, they would hold.
Not a vote of confidence. Look at Besos, Musk etc.
I wish them all the best though!
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