The value of Coinbase is said to be worth $100 billion considering the trading of private shares before the direct placement. According to an analyst, David Trainer, Coinbase is not worth the high price placed on its value. Before the forthcoming direct placement, Coinbase private trade shares now show that the firm is worth $100 billion. The analyst remarked that the crypto market is becoming increasingly competitive; hence, Coinbase has not attained such value, considering its market share and margins. He added that such valuation was unsustainable either now or in the future.
Wall Street is denying stakeholders access to real information
Trainer believes that Coinbase is being valued without considering the fundamental aspects. He believes that Wall Street denies stakeholders access to accurate information that will allow them to determine the accurate price. Instead, Wall Street is dishing out fool theory to entice investors to buy stocks, particularly during the economic boom at prices that are not commensurate with their fundamentals.
A publication released by reporters shows that Coinbase is worth the valuation attributed to it in its IPO as the firm earned a substantial amount of money in 2020. According to Bloomberg, 85% of firms that got listed as public companies in 2020 made losses. But Coinbase was able to earn $322 million gains published in its latest filing, and that has attracted many investors towards Coinbase and its stock. However, Trainer insists that Coinbase is profiting from the bullish momentum in the crypto market in which Coinbase is a major stakeholder. But the company’s valuation is being characterized by sentiment rather than fundamentals, Trainer says.
Crypto bubble will eventually burst
Trainer states that Wall Street is indeed influencing people’s opinion on the valuation of stocks. “So long as you are willing to accept Wall Street’s valuation, you may not get a clear picture of the assets’ real price.” Furthermore, Trainer said that this was not the first time that a stock price would be overvalued. In the past, airlines and automobile industries had witnessed such bubbles. At the initial stage of their invention, many airlines and auto manufacturers were undervalued. But eventually, only a few of them could survive, and those overvalued companies later saw their prices fall. The analyst predicted the same situation for the crypto market.
Trainer argues that stock prices undoubtedly move in tandem with their competitors’ costs whenever the market becomes mature. But the crypto industry is not exhibiting such a feature. A report published by New Constructs advises investors to steer clear of Coinbase at its current price. Although Trainer also doesn’t advise buying Coinbase at such “an overvalued price,” he asserts that the way stocks are valued should be different from the way companies are. He added that he thinks Coinbase’s current valuation is unsustainable for an extended period. The reason, he said, is that the value of a company is distinct from the value of its stock. Regarding Coinbase, he sees no new technological innovations that will guarantee that the company maintains its current worth.