Riding a wave of global hype, excitement and hype, Coinbase went public on April 14, 2021. It has been a bumpy 13 months.
The company went public with a “direct” listing, which is somewhat unusual and a bit riskier than a traditional IPO. With a direct listing, there are no investment banks or groups of wealthy investors promising to create a stock market once it goes public. Instead, the company’s shares are essentially raised on a stock exchange, in this case the Nasdaq, for investors to buy immediately at whatever price the market makes. Sometimes this works. Other times, not so much.
Unfortunately, Coinbase has proven to be more in the “not muchCategory.
Along the way, CEO Brian Armstrong’s net worth is obliterated.
Prior to last year’s IPO, analysts had expected Coinbase’s share price to fall at around $250 when the direct listing was completed. This would have given the company a market capitalization of $65 billion.
Soon after the debut, the price reached $300. Then $350. Then $380. Then 400 dollars. Then, very briefly, $430.
At $430, the company’s market capitalization was $112 billion.
Brian Armstrong owns 20% of the outstanding Coinbase shares. At $430 per share, Armstrong’s paper net worth briefly surpassed…
At this peak level, Armstrong was one of the 70 richest people in the world. He ranks in the same ballpark with former Google CEO Eric Schmidt, hedge fund king Carl Icahn, and Lauren Powell Jobs (Steve Jobs’ widow).
Riches fade away
On May 9, 2020, the price of Bitcoin was just under $60,000. Ten days later, bitcoin briefly dropped to $30,000.
The price of Ethereum fell 20% in 24 hours. Binance is down 40%. Dogecoin is down 20%.
Finally, the entire cryptocurrency sector has diminished 1 trillion dollars In terms of value in a day.
With this drop, Coinbase’s share price briefly touched $208 before closing at $224.
At $224 a share, Brian Armstrong’s paper net worth was…
9 billion dollars
Between that low point in late May of last year and early October, Coinbase’s share price has remained at around $240 a share. Then there was a bright spot! By mid-November, the shares were fully zoomed in to their IPO price of $342. Here is what happened between mid-November and this morning (May 11, 2022):
As you can see, Coinbase’s stock price has fallen in the past six months by just over 84%.
Coinbase’s market capitalization has fallen from about $90 billion in November to nearly $11 billion today.
At today’s after-hours price of $61 per share, Brian Armstrong’s net worth is currently…
Now, don’t get me wrong, if that was where he stayed forever, $2.2 billion would be a very respectable net worth. Plenty to continue making payments on that $133 million mansion that Brian bought in January of this year. But… what if this isn’t the end of the pain?
In the company’s quarterly earnings report released Tuesday afternoon, Coinbase reported that revenue was down 27% from a year ago. Monthly transaction users (people who use the service) decreased from 11.4 million in the fourth quarter of 2021 to 9.2 million in the first quarter of 2022. The trading volume in the same periods decreased from $550 billion to $310 billion.
If Coinbase’s stock price drops another 50%, which isn’t exactly an unimaginable scenario, Brian Armstrong’s net worth would be $1.2 billion. on paper. If he cashed out all of the money and left about $500 million in usable cash, that would be great for most people, but maybe not great enough to keep the $133 million mansion? And that’s all assuming Coinbase isn’t on a march toward zero, which also isn’t exactly a far-fetched scenario.