Kraken Reconsiders Direct Listing, May Opt for an IPO Instead

Divya  |  Jun 11, 2021

Kraken Co-Founder and CEO, Jesse Powell has put the brakes on a direct listing for his company given Coinbase’s lackluster performance at Nasdaq. In an interview with Fortune, Powell shared that the firm is looking into an initial public offering (IPO) after Coinbase’s direct public listing failed to meet expectations. Coinbase became a publicly traded company on 14 April.

Powell Suggests a Kraken IPO is on the Horizon

Kraken had first hinted at public listing in March after Coinbase made it clear that it will pursue a direct listing on Nasdaq. Powell highlighted that Kraken is trying to avoid all the issues that come with a direct listing. He said, “Not having lock-ups, having billions of dollars of insiders be able to dump their shares, you know, on day one. I think it has a dampening effect on the market.”
Speaking on a potential IPO for the company, Powell added, "The IPO is just a very different process." Powell is presently unclear on the route Kraken will take to get to the IPO. He wants to follow market developments in the second half of the year before his company comes out with an IPO strategy.
“You know, hopefully by then we have more analyst coverage out and there's just more of a track record of growth for the industry,” he stated.

Coinbase is Underperforming Due to Anti-Crypto Sentiment

Coinbase stock launched to much anticipation at $327 on April 14. But the excitement couldn’t sustain COIN’s price and the stock has seen a significant decline, with prices decreasing by 32.4%.

Powell believes that anti-crypto sentiment on Wall Street might explain why Coinbase failed to deliver as per expectations. He suggests that a lot of traditional players “actually have a lot to lose” if cryptocurrencies take off. And these people would try and push back against the developments for “as long as possible.”
Patrick O’Shaughnessy is an analyst for Raymond James, an investment bank, who feels that Coinbase is too dependant on transaction fees to earn its revenue. “We view it unlikely that over the long-term retail customers will continue to happily pay a 1%+ transaction fee, particularly if/when trusted financial institutions begin to offer trading and custody,” he underlines.

Notably, Raymond James has rated the Coinbase stock as “underperform”, a category it reserves for assets it expects to perform below expectations at the S&P 500, over the next six to 12 months.

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