CoinShares to IPO for a Potential Valuation of $3 to $5 Billion

CoinShares, a major digital asset investment firm, is set to list publicly in a move that is expected to bring clarity and mainstream acceptance to the industry. 

The London-based firm announced their intention to list shares on the Nasdaq First North Growth Market in Sweden with a target trading date of March 11th under the ticker “COIN” on Monday. 

The initial public offering will consist of an issue of a maximum of 3,364,403 shares priced at SEK 44.60 (USD 5.38), according to the company’s prospectus. The subscription period began on Tuesday and will end on March 2, 2021. 

Because this is the first time a public market is going to assign a multiple to a crypto asset manager, CoinShare’s IPO can act as a valuation proxy for other digital asset investment firms.

A key metric is CoinShare’s comprehensive income (CI). CoinShare’s CI for the first nine months of 2020 eclipsed all of 2018’s. This likely means the company’s earnings before interest, taxes, depreciation and amortization (EBITDA) was $30 million in 2020 with a $60 million run-rate EBITDA. 

“Given where Coinbase is expected to price, a 50x multiple on run-rate EBITDA seems possible, if not conservative for CoinShares,” said Ryan Selkis, founder and CEO of Messari, in a recent newsletter. “The company might come out at a $3-5 billion valuation with a target trading date of March 11.” 

The valuation that the market assigns CoinShares will also allow investors to back into valuations for similar companies, such as Bitwise or Grayscale. 

CoinShares is not the only digital asset company looking into an IPO. There has been an explosion in the IPO market in recent months as companies hurried to take advantage of the rally after the pandemic-induced dip in March.

In October 2020, Diginex’s stock listed on the Nasdaq exchange under the ticker EQOS. Cryptocurrency exchange Coinbase announced plans to go public via a direct listing in January. The company has not yet given an official IPO target date or set a share price, but shares sold via Nasdaq Private Markets were most recently valued at $373, putting Coinbase’s valuation at about $100 billion.

 eToro, an Isreali fintech company, is reportedly planning on launching an IPO during the second quarter of 2021. 

“These new crypto IPOs are going to add reflexivity to the already-hot crypto markets,” said Selkis. “Hot IPOs mean more interest in the underlying. More spot bidding means more AUM and revenue for the newly public companies.” 

The few companies with crypto exposure that trade on public exchanges have attracted large premiums in recent months.  Many have outperformed bitcoin itself, with companies like Silvergate and Microstrategy rising 844% and 433%, respectively, compared to bitcoin’s 332%.

“Last July, MSTR had a valuation of ~$1 billion,” said Selkis. “Since then, they raised $2 billion to acquire bitcoin for the company balance sheet. That bitcoin is now worth $4.5 billion, while MSTR’s valuation has soared to $6.6 billion. That means the non-bitcoin equity value of the company is now up $1.7 billion or 170% from its pre-bitcoin status.”

While the premium on publicly traded stocks with crypto exposure have swelled, the exposure on exchange-traded products have dipped. Grayscale’s Bitcoin Trust’s (ticker GBTC) premium, which historically has been high, dipped negative for the first time since its launch in 2013 earlier this month.

The exact factors that caused GBTC shares to trade at a discount to net asset value are unknown, and not necessarily related to the availability of other public proxies for digital asset exposure. Still, GBTC’s premium has been viewed by many industry participants as a decent gauge of traditional investor demand.

It is possible that as more options exist to satisfy public market investors’ appetite for digital asset exposure, the lower GBTC’s premium will fall.

In addition to the IPO announcement, CoinShares also released a decentralized finance (DeFi) token Monday. The firm partnered with Index Coop, the creators of the DeFi Pulse Index, and the Imperial College of London to launch the CoinShares Gold and Cryptoassets Index Lite (CGI) token, according to documents released by CoinShares.