Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<ul>
<li>In this insight, we provide some details of Dunamu's IPO as it appears that the company may be leaning towards listing in the US. Dunamu is one of the largest cryptocurrency exchanges in Korea.</li>
<li>We compare Dunamu to Coinbase which is expected to complete its direct listing in April. The expected value of Dunamu is wide ranging, depending upon how Coinbase is valued. If we assume Coinbase is valued at $100 billion (high case), the valuation range for Dunamu would be from $10 billion to $20 billion (using 10% to 20% valuation relative to Coinbase). If we assume Coinbase is valued at $40 billion, the valuation range for Dunamu would be from $4 billion to $8 billion (using 10% to 20% valuation relative to Coinbase).</li>
<li>Some of the major investors of Dunamu include Kakao Corp, Hanwha Securities, and Woori Tech Investment. We provide sensitivity analysis of Dunamu's valuation on these three companies. </li>
</ul>


In this insight, we provide some details of Dunamu's IPO as it appears that the company may be leaning towards listing in the US. Dunamu is one of the largest cryptocurrency exchanges in Korea.
We compare Dunamu to Coinbase which is expected to complete its direct listing in April. The expected value of Dunamu is wide ranging, depending upon how Coinbase is valued. If we assume Coinbase is valued at $100 billion (high case), the valuation range for Dunamu would be from $10 billion to $20 billion (using 10% to 20% valuation relative to Coinbase). If we assume Coinbase is valued at $40 billion, the valuation range for Dunamu would be from $4 billion to $8 billion (using 10% to 20% valuation relative to Coinbase).
Some of the major investors of Dunamu include Kakao Corp, Hanwha Securities, and Woori Tech Investment. We provide sensitivity analysis of Dunamu's valuation on these three companies. 


Coinbase Global  / Equity Capital Markets

<p>Our valuation analysis suggests a range of $31.9 billion to $47.9 billion in market cap for Coinbase. Our base case valuation of Coinbase is $39.9 billion, which is nearly 5x the value the company received in October 2018 ($8 billion) in private funding transaction. However, our base case value of $39.9 billion is nearly 60% lower than the purported recent private market value of <a href="https://www.axios.com/coinbase-valued-100-billion-direct-listing-9b43e316-7ff7-4f6a-a1db-4dc2481a93ee.html" target="_blank" rel="noopener">$100 billion</a> that Coinbase received recently.</p>
<p>Overall, at an implied market cap value of $100 billion for Coinbase, we think that there is much larger potential downside risk than upside appreciation. As such, we think that the prudent investor should avoid this direct listing of Coinbase if indeed it is priced at nearly $100 billion. </p>

Our valuation analysis suggests a range of $31.9 billion to $47.9 billion in market cap for Coinbase. Our base case valuation of Coinbase is $39.9 billion, which is nearly 5x the value the company received in October 2018 ($8 billion) in private funding transaction. However, our base case value of $39.9 billion is nearly 60% lower than the purported recent private market value of $100 billion that Coinbase received recently.
Overall, at an implied market cap value of $100 billion for Coinbase, we think that there is much larger potential downside risk than upside appreciation. As such, we think that the prudent investor should avoid this direct listing of Coinbase if indeed it is priced at nearly $100 billion. 

Coinbase Direct Listing Valuation Analysis

<p><a href="https://www.smartkarma.com/entities/coinbase-global-inc" target="_blank" data-smartkarma-citation="entities:32227:1" rel="noopener">Coinbase (COIN US) </a>plans to complete its direct public listing in April. Coinbase is an operator of one of the largest digital currency exchanges in the world. Established in 2012, Coinbase currently has more than 43 million retail users and 7,000 institutional investors. </p><p>According to the prospectus, the Coinbase shares have traded hands at prices from $200 to $375. The volume weighted average price per share was $343.58 from January to 15 March. Coinbase has recently been valued as high as <a href="https://www.etftrends.com/crypto-channel/coinbase-valued-at-100-billion-ipo-approaches/" target="_blank" rel="noopener">$100 billion</a>, which is a significant increase from its private market value of $8 billion in October 2018. Early investors in Coinbase include Tiger Global Management, Y Combinator Continuity, New York Stock Exchange, and Andreessen Horowitz.</p><div class="content-highlight">
<h2>A $100 Billion Valuation?</h2>
<p>Numerous media sources have cited that Coinbase is seeking about <a href="https://www.bloomberg.com/opinion/articles/2021-03-02/coinbase-ipo-coin-the-crypto-exchange-is-a-100-billion-cult" target="_blank" rel="noopener">$100 billion</a> in valuation at its direct public listing. Despite the numerous positive factors (such as surging sales growth and turn to profitability), it is difficult to argue for this high of a valuation. At $100 billion valuation, it would represent a whopping 78x P/S multiple (using 2020 sales). It certainly helps that Bitcoin and Ethereum have been surging in prices in the past year.</p>
<p>Nonetheless, even Coinbase itself has pointed out in its prospectus that Bitcoin has experienced four major cycles since its launch (the fourth cycle is still ongoing). We would argue that for the prudent investors, there is no rush to buy Coinbase while Bitcoin price is near at its all time highs. The prudent investor should wait until there is a major correction in the Bitcoin price to see how the Coinbase's financials are able to withstand such correction. </p>
<p><strong>In addition, we would argue that as the Bitcoin and crypto trading become more mainstream, the trading fees for the cryptos WILL GO DOWN much more significantly, which is likely to negatively impact Coinbase.  </strong></p>
</div>

Coinbase (COIN US) plans to complete its direct public listing in April. Coinbase is an operator of one of the largest digital currency exchanges in the world. Established in 2012, Coinbase currently has more than 43 million retail users and 7,000 institutional investors. According to the prospectus, the Coinbase shares have traded hands at prices from $200 to $375. The volume weighted average price per share was $343.58 from January to 15 March. Coinbase has recently been valued as high as $100 billion, which is a significant increase from its private market value of $8 billion in October 2018. Early investors in Coinbase include Tiger Global Management, Y Combinator Continuity, New York Stock Exchange, and Andreessen Horowitz.
A $100 Billion Valuation?
Numerous media sources have cited that Coinbase is seeking about $100 billion in valuation at its direct public listing. Despite the numerous positive factors (such as surging sales growth and turn to profitability), it is difficult to argue for this high of a valuation. At $100 billion valuation, it would represent a whopping 78x P/S multiple (using 2020 sales). It certainly helps that Bitcoin and Ethereum have been surging in prices in the past year.
Nonetheless, even Coinbase itself has pointed out in its prospectus that Bitcoin has experienced four major cycles since its launch (the fourth cycle is still ongoing). We would argue that for the prudent investors, there is no rush to buy Coinbase while Bitcoin price is near at its all time highs. The prudent investor should wait until there is a major correction in the Bitcoin price to see how the Coinbase's financials are able to withstand such correction. 
In addition, we would argue that as the Bitcoin and crypto trading become more mainstream, the trading fees for the cryptos WILL GO DOWN much more significantly, which is likely to negatively impact Coinbase.  


United States

Coinbase Global, Inc. provides financial solutions. The Company offers platform to buy and sell cryptocurrencies. Coinbase Global serves clients worldwide.

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Coinbase Global (COIN US)

Initial Thoughts on the Dunamu IPO

In this insight, we provide some details of Dunamu's IPO as it appears that it may be leaning towards listing in the US. Dunamu is one of the...

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Coinbase Direct Listing Valuation Analysis

Our base case valuation of Coinbase is $39.9 billion, which is 60% lower than the purported recent private market value of $100 billion that...

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Coinbase Direct Public Listing Preview

We would argue that as the Bitcoin and crypto trading become more mainstream, the trading fees for the cryptos WILL GO DOWN much more...

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