As Coinbase stock falls, the crypto exchange prepares to raise capital for insurance

As Coinbase stock falls, the crypto exchange prepares to raise capital for insurance

Coin base filed a shelf registration statement with the SEC, preparing for a potential capital raising or debt issuance as the crypto exchange's shares continue to free fall, wiping out billions of dollars in shareholder value.

A shelf registration allows a company to register a new issuance of securities in the form of primary or secondary offerings. Since Coinbase went the direct listing route, it did not raise additional debt capital in its 2021 IPO.

“Although we have no immediate plans to offer securities at this time, by filing the shelf registration statement we will now be able to offer and sell securities in the future should we choose to do so,” Coinbase wrote in a Blog entry Tuesday.

The filing's mandate is fairly broad, according to Michael Miller, an equity analyst at Morningstar Research, as it covers common stock and preferred stock as well as debt issuances, leaving Coinbase multiple options to raise capital relatively quickly if executives pull that lever.

Coinbase reported first-quarter revenue of $1.17 billion, missing analysts' estimates. Shares plunged 26% on Wednesday.

Total first-quarter trading volume was $309 billion, a 44% decline from the fourth quarter, which the exchange attributed to market conditions.

While Coinbase has $6 billion in cash and another $1.3 billion in crypto holdings on its balance sheet as a buffer in a bearish market, Miller said, the filing positions Coinbase to quickly access capital markets as its core businesses continue to face such strong headwinds.

The exchange, like its competitors, has been working to diversify its revenue streams away from its bread-and-butter trading fees - which have fallen as new exchanges launch - and toward other money-generating ventures. Efforts to date have been mixed at best.

„Angesichts des Abrutschens von Coinbase aus der Rentabilität könnten sie Schwierigkeiten haben, Schulden zu einem attraktiven Zinssatz auszugeben, ohne dass sich die Märkte für Kryptowährungen erholen“, sagte Miller. "This makes, in my opinion, issuing additional shares, common stock or preferred stock, more likely than new debt. However, at the moment it is unclear whether they will do either."

Coinbase's first-quarter earnings report also includes a new disclosure clarifying that customers' assets are not protected for a refund if the exchange goes under. The exchange currently holds $256 billion in fiat currencies and digital assets.

“In the event of bankruptcy, the crypto assets we hold on behalf of our customers could be subject to bankruptcy proceedings, and those customers could be treated as our general unsecured creditors,” Coinbase wrote in the first quarter Results report Tuesday.

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The post As Coinbase Stock Drops, Crypto Exchange Preps Insurance Capital Raise is not financial advice.