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Why the Coinbase IPO will be controversial for many investors

Yahoo Finance's Dan Roberts breaks down how the Coinbase IPO might play with retail investors who are new to cryptocurrency.

Video Transcript

SEANA SMITH: It's time for our crypto corner. Bitcoin losing a little bit of steam today, but its recent rally generating a ton of excitement in the space. We've been talking about it every day for the last couple of weeks. And this, of course, coming as Coinbase readies its IPO.

We want to bring in Dan Roberts for more on this. Because, Dan, it's an extremely exciting time for crypto right now. But you actually think this IPO could be a little controversial. Why is that?

DAN ROBERTS: Yeah, Seana, I think it will be very controversial. And let's just refresh our viewers' memories here. Coinbase filed confidentially for IPO in late December. Now, that doesn't mean that the IPO is going to happen this month. It could take many months. And I think there are a number of reasons to believe this IPO might get a little delayed.

And let's remember that Uber filed confidentially to go public in December of 2018. It ended up not actually listing until May of 2019. So the Coinbase IPO could happen this month. It could happen in five months. It's anyone's guess.

But let's just talk about some of the recent history with Coinbase. It is the biggest Bitcoin exchange in the US. It has 35 million customers. It has an $8 billion valuation. Although, that was last reported in 2018. It's probably bigger by now. And it's also profitable. CEO Brian Armstrong has said that it's been profitable for a few years now. All of those are in its favor. It could be a huge, very successful listing.

But it also is facing a lawsuit from a customer over its listing of XRP. Because Ripple Labs, the company behind that token, is being sued by the SEC. The SEC believes that the creation of XRP was an unregistered securities offering. So now Coinbase is being sued for listing XRP because of the fees it gets. And that customer basically accusing Coinbase of, you should have known that the SEC would go after it.

That's just one lawsuit, but it speaks to the controversy around cryptocurrency. And Coinbase, of course, basically a bank for crypto. So let's also think that maybe some regulators are going to delay and kind of create a thorn in the side of this company, which is why some people think it might go the direct-listing route. All of that is just controversy about the crypto industry. Add to that the fact that there's been a recent slew of bad press about the company and its internal culture.

Now, that might not be the kind of thing that prospective market investors care about. You might still see the shares go nuts when it debuts. But I think this is a real milestone for the crypto industry. It's the first pure play crypto IPO that we'll see, unless Bakkt beats it to market by going public via SPAC.

So there's a lot to think about here. And I don't think it's very straightforward as far as tech IPOs in 2021 go.