Scathing Allegations Should Make Investors Nervous About Coinbase Global

Scathing Allegations Should Make Investors Nervous About Coinbase Global

Cathie Wood might like Coinbase (COIN) stock, but informed investors should be cautious as a class-action lawsuit pokes holes in Coinbase’s reputation.

I’m flip-flopping today - there’s no point in denying it. Not too long ago, I was bullish on Coinbase Global < NASDAQ:COIN> and even hinted at high price targets for COIN stock, like $444 and even $600.

My enthusiasm was fueled by some Wall Street analysts' optimism on Coinbase. I was probably influenced by my passion for Bitcoin < CCC:BTC-USD>, as well.

However, informed investors must be willing to adjust their stances and strategies when circumstances change. After all, flexibility is the key to long-term success in the markets.

So, let’s delve into the ever-shifting developments surrounding Coinbase - the good, the bad and sometimes even the legally questionable.

A Closer Look at COIN Stock

The history of COIN stock is rather brief. Instead of conducting a typical initial public offering (IPO), Coinbase went public via a direct listing or direct public offering (DPO) on April 14, 2021.

The stock was assigned a starting price of $250 per share. However, it almost immediately went above $300 on the stock’s first day of public trading.

Unfortunately, the folks who bought COIN stock above $300 and held their shares, haven’t enjoyed huge returns.

And so far, it appears that Coinbase has disappointed many of its investors.

By early June, the stock had declined to the $220 area, and as of July 23, it was trading at around $223.

While we’re here, I should point out that Coinbase’s trailing 12-month price-to-earnings ratio is 46.38.

Value-focused investors might choose to wait for a lower valuation, and I respect that.

Just be aware that when there’s cryptocurrency involved, traditional valuation metrics might not have the same relevance that they would with old-school, blue-chip stocks.

First, the Good (or Wood) News

As you may already be aware, there are investors who like to follow Cathie Wood and her ARK Invest funds.

Story continues

These funds, as far as I can discern, are geared towards innovation and disruption - and on “momo” (momentum) stocks which sometimes have high P/E ratios.

“Disruptive innovation is often not priced correctly by traditional investment strategies because people may not understand how big the ultimate opportunities are going to be,” Wood summarized on the ARK Invest home page.

So apparently, some of us don’t “understand” that the market’s high flyers can fly higher. Got it.

Setting my sarcasm aside (for a moment), I’ll simply report the fact that as of June 1, 2021, COIN stock has a 3.5% weighting in the ARK Innovation ETF < NYSEARCA:ARKK>.

If that’s a sufficient reason for you to invest in Coinbase, then be my guest.

There’s no denying that the company is, indeed, innovative and disruptive.

Or at least, we can say that Coinbase got into the crypto trading platform sphere early. So, there’s that.

A Class-Action-Sized Problem

Now that I’ve provided some (possibly) good news, it’s time to balance the scales with an item of concern.

In particular, a high-profile class-action lawsuit has named Coinbase as a defendant, along with CEO Brian Armstrong and Chief Legal Officer Paul Grewal.

The suit was filed by law firm Scott + Scott, and names Coinbase shareholder Donald Ramsey as a plaintiff.

Here’s where it gets nasty. Ramsey, reportedly, is accusing Coinbase and its executives of making “materially misleading statements” in their offering materials at the time of the company’s public listing.

They’re also being accused of offering positive statements that “lacked a reasonable basis.”

“At the time of the Offering: (1) the Company required a sizable cash injection; (2) the Company’s platform was susceptible to service-level disruptions, which were increasingly likely to occur as the Company scaled its services to a larger user base,” the class action specifically alleges.

To rephrase it informally, Coinbase is being accused of misleading its prospective investors while under-reporting the company’s shortcomings.

Of course, like any lawsuit, this might go nowhere. Yet, the damage to Coinbase’s reputation could linger for a while.

And if it’s revealed, along the way, that Coinbase did actually engage in shady practices, the damage could run deep.

The Bottom Line

All in all, I’d say that valuation concerns are the least of COIN stockholders' problems right now.

At the very least, the investors will want to monitor the developments pertaining to the class-action lawsuit.

And if things go from bad to worse, it’s okay to liquidate your position and await less fraught opportunities.

The stock market can be unpredictable, volatile, and sometimes totally nonsensical. InvestorPlace.com strives to cut through the noise and bring you information on what matters – and how it impacts your portfolio. We deliver thoughtful coverage on everything from stocks to cryptos to pre-IPO investments. So whether you live and breathe breaking stock news or expect your stocks to pay you, InvestorPlace.com has your back.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

COIN shares were trading at $242.19 per share on Monday morning, up $17.27 (+7.68%). Year-to-date, COIN has declined -26.22%, versus a 18.50% rise in the benchmark S&P 500 index during the same period.

About the Author: David Moadel

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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6週首見！比特幣破4萬美元 Coinbase、區塊鏈ETF飆漲

MoneyDJ新聞 2021-07-27 09:56:40 記者 李彥瑾 報導

先前消息傳出，全球電商龍頭亞馬遜(Amazon)可能在今年底前接受比特幣付款，引發市場關注。週一(26日)比特幣價格跳漲，一度衝破40,000美元大關，創6月中旬以來新高，比特幣概念股及區塊鏈相關ETF也連帶受惠，股價於週一出現一波飆漲。

Business Insider、《華爾街日報》等外媒報導，根據道瓊市場數據(Dow Jones Market Data)，週一比特幣價格飆升9%，最高觸及40,501.70美元，為近6週來首次升至40,000美元上方。主因是英國媒體City A.M.引述消息人士報導，亞馬遜最快將在今年開放使用比特幣付款，而亞馬遜日前公開招募數位貨幣與區塊鏈產品主管，更增加這項消息的可信度。

消息人士稱，自2019年以來，亞馬遜一直在研究採用加密貨幣的計畫，甚至可能推出自家加密貨幣，以更多回饋獎勵作為誘因，吸引消費者使用亞馬遜自家虛擬幣購物。

不過，亞馬遜否認City A.M.的說法，比特幣價格於週一稍晚開始回落。

受惠比特幣價格創6週新高，美國最大加密貨幣交易所Coinbase週一股價飆升9.13%、收245.45美元。Coinbase股價表現與比特幣走勢密切相關，因近期比特幣遭大量拋售，目前股價遠低於4月14日上市當天開盤價381美元。

區塊鏈相關ETF股價也在週一大幅上漲。MoneyDJ XQ全球贏家系統報價顯示，Global X區塊鏈ETF(BKCH.US)股價勁揚14.05%；VanEck Vectors數位轉型ETF(DAPP.US)跳漲13.97%；Bitwise加密行業創新者ETF(BITQ.US)強漲13.62%；Amplify轉型數據共享主動型ETF(BLOK.US)走揚7.51%。

＊編者按：本文僅供參考之用，並不構成要約、招攬或邀請、誘使、任何不論種類或形式之申述或訂立任何建議及推薦，讀者務請運用個人獨立思考能力，自行作出投資決定，如因相關建議招致損失，概與《精實財經媒體》、編者及作者無涉。

延伸閱讀：

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韓國支付巨頭Kakao Pay上市遇阻，螞蟻集團持股45%

資料來源-MoneyDJ理財網

Why Coinbase, MicroStrategy, and Other Bitcoin Stocks Rocketed Higher Today

What happened

Shares of some Bitcoin (CRYPTO:BTC) stocks were up by double-digit percentages Monday morning. The original cryptocurrency was up more than 13% as of noon EDT today from where it traded on Friday, and various Bitcoin stocks and ETFs adjusted higher as well.

Here’s how some U.S. listed stocks were faring Monday morning:

Coinbase Global NASDAQ:COIN) was up 7.5%.

MicroStrategy NASDAQ:MSTR) was up 19%.

Riot Blockchain NASDAQ:RIOT) was up 19%.

Grayscale Bitcoin Trust OTC:GBTC) was up 18%.

So what

A confluence of factors came together to push Bitcoin and companies reliant on the crypto’s fate higher. Last week, Tesla (NASDAQ:TSLA) CEO Elon Musk said the electric vehicle maker might start accepting Bitcoin as a form of payment again. Twitter (NYSE:TWTR) CEO Jack Dorsey said the social network is also looking to integrate the crypto into its operations. Dorsey’s other company, Square (NYSE:SQ), is already a prominent pioneer of the Bitcoin movement.

Perhaps the biggest news, though, was a hint from e-commerce giant Amazon (NASDAQ:AMZN) that it might be about to enter the crypto space as well. Amazon hasn’t officially stated this, but it did post a job listing for a “Digital Currency and Blockchain Product Lead.” The listing spurred speculation that cryptocurrencies might soon be accepted as a form of payment at the leading e-commerce business.

Now what

The cryptocurrency market can be incredibly volatile, and just a few bullish indicators can be enough to spur a new run higher. Bitcoin is still some 40% below its all-time high of nearly $65,000, notched back in April, but the move higher over the weekend made up significant ground.

Crypto brokers like Coinbase get a boost from crypto prices rising, but that’s not the only factor at work. Since they earn fees from trading of assets like Bitcoin, the expanding adoption of cryptocurrencies and blockchain technology benefit them if the volume of trades increases as well. MicroStrategy and Riot Blockchain are notable Bitcoin acquirers with billions of dollars' worth on their balance sheets, so a rise in Bitcoin’s value increases the value of the companies as well. If Bitcoin continues to rally, expect these stocks to ride its coattails higher, too.