Shopify CEO spends $3 million on Coinbase stock in 2 months

Shopify CEO spends $3 million on Coinbase stock in 2 months

Shopify CEO Tobias Lütke has been busy buying the dip in Coinbase shares after raising nearly $3 million worth of shares in the last two months.

Lütke, who co-founded e-commerce giant Shopify in 2006, has spent an average of about $369,000 on Coinbase shares each week since the start of August.

The billionaire tech entrepreneur became a board member of Coinbase in February and currently holds the title of director, which requires him to file trades with the SEC.

All of its purchases were made in accordance with a Rule 10b5-1 trading plan adopted on May 26, 2022, when Coinbase shares were trading at just under $70 after falling nearly 75% year-to-date.

Lütke has bought Coinbase shares for as low as $62 (early September) and as high as $97.24 (mid-August). In total, he bought 40,315 shares for $2,949,833, per SEC filing, at an average price of $73.17.

Coinbase shares were trading for $65 as of 11:30 a.m. ET, meaning Lütke is down 12% from his previous purchases, a nominal loss of $330,000. Blockworks has reached out to Lütke but has not yet received a response. Coinbase declined to comment.

The company awarded Lütke shares in February and June, and he rejected beneficial ownership of 25,500 shares around the time of his election to the board. Lütke owns 65,815 Coinbase shares, now worth $4.28 million, according to his latest disclosures.

But Lütke's repeated purchases are rare among company insiders. In fact, another Coinbase executive has bought the company's shares since it went public via direct listing last April: co-founder Fred Ehrsam.

Ehrsam spent $76.8 million on more than 1.12 million shares in May, with trades averaging $68.49 per share. This puts Ehrsam in the red by 5%, which at current prices amounts to $3.35 million in paper losses on these particular trades.

Coinbase insiders usually sell their shares

In fact, it's far more common for Coinbase insiders to cash in their shares. Finally, Coinbase's direct listing differed from a traditional initial public offering (IPO) because no new shares were created when trading opened on Nasdaq. Instead, all liquidity came from existing shareholders.

Early investors and other insiders like venture capital titan Andreessen Horowitz and tech investor Fred Wilson have participated alongside virtually Coinbase's entire suite of C-level executives, including CEO Brian Armstrong, general counsel Paul Grewal, chief financial officer Alesia Haas, chief product officer Surojit Chatterjee and chief accounting officer Jennifer Jones, the latter of whom sold $595,000 worth of company stock just in August.

In total, Coinbase insiders dumped nearly 15.7 million company shares for about $5.8 billion at an average price of $369.39, according to SecForm4 data compiled by Blockworks - more than 85% of which were dumped on Coinbase's first day of public trading.

Coinbase shares would have to rise more than 450% to reclaim the previous average selling price of insiders.

Wilson has sold more Coinbase shares than any other insider, earning $3.63 billion through his own sales and those of his investment vehicle Union Square Ventures.

Coinbase co-founder Ehrsam is in second place - he sold just over 1.5 million shares in 2021 for $492.3 million at an average price of $328.18 - followed by Marc Andreessen with $311.2 million in sales at an average price of $294.15 per share.

Short interest remains stable despite the headache

Coinbase shareholders writ large will need strong conviction to move forward. The company faces ongoing headwinds in the fourth quarter of this year that go well beyond the bleak overall macroeconomic outlook.

“Coinbase is still affected by many current issues, including SEC actions, technical issues, terrible financials (hugely negative EBITDA) and fee structure,” said Oisin Maher, founder of QuantX Analytics.

Stock picking is increasingly relying on back-to-basics approaches to calculate where to park money to weather inflation and depressed market sentiment, and is seeking strong balance sheets with significant revenue growth. “I’m not a fan of their heavy use of non-GAAP metrics in their accounting,” Maher said.

“The stock may have short-term upside potential, but beyond that I would rather stay away.” Coinbase reported a 63% year-over-year decline in revenue in the second quarter of this year and posted a loss of $1.1 billion on revenue of $803 million, both figures below analysts' expectations.

These factors could explain why Shopify's Lütke is the only Coinbase insider to load up on Coinbase shares in the last quarter, despite the plunge.

Coinbase’s stable short interest offers a glimmer of hope. Over the past two months, COIN's short interest has hovered between 24.6 million and 26 million shares, representing about 17% of the float, suggesting that bets for further significant dumps are drying up.

Participate THIS: LONDON and learn how the largest TradFi and crypto institutions see the future of institutional crypto adoption. Register here.

The post “Shopify CEO Spends $3M on Coinbase Stock in 2 Months” is not financial advice.