Looking through Coinbase’s financials, the easiest cut is the 4,756 employees at 3q22, up from 2,781 at 3q21. Could also roll back technology spend back to 2021 levels, maybe.
Given their debt is bonds, they have at least 6 quarters to right the ship before they burn through their cash. No need to worry about covenants - even tho cov-light structures today make it almost impossible to default on TLs.
> “ There is no way you “regulate” an industry that causes costs to go down”
Regulation favors the big players and drives their smaller competitors out of business. Coinbase does lots of regulation virtue signaling and unlike FTX they actually do the regulation.
Complete noob & subscriber, trying to learn. My crypto is currently all in Coinbase. I didn't know that there were other ways to do this... looks like my next step needs to be some sort of cold wallet? Any suggestions? I'll go search now as well, just thinking out loud - I have so much to learn... thank you.
i don't get it. i've been trying to answer this question for a few weeks. why haven't the layoffs already happened? i know they had layoffs in june, but why wasn't the number bigger?
The bull case on this name is it's a SCHW,-like business. Could maybe even be run leaner than SCHW with lower headcount (COIN clients are lower touch). SCHW is a great company of course, COIN is run by clowns.
SCHW has been printing ~40% operating margins and 25-30+% net margins on revs ranging from 8.6B (in 2017) to 18b last year (much higher revs now because they now are making money on client cash balances as interest rates re-normalized.) It's an excellent (mature) business.
In the 2021 boom year COIN ran an op margin of 46% (3624m op profit on revs of 7837m), which drove a net margin of 39%. Diluted EPS was $14/share! With tremendous cash flows. This is why the stock *was* in the 300s, people were extrapolating this out.
So if you're a bull you have to assume that
* COIN can fix its spend problem,
* they can last until crypto winter ends,
* and then position themselves for wider crypto adoption down the road.
Then you have to look at a range of top line scenarios: At revs of 5b at 20% net margins you ought to see $4-5 a share EPS at if COIN were run properly (15x PE = $75/share stock).
At 8B revs (stretch upside, some margin expansion) they would see something like $10-12 a share EPS (maybe $150-180 stock).
So there are possible scenarios where the stock works, but they are contingent on "things going right."
And then at only $10b in market cap here, this could be an interesting acquisition target for a big global bank (caveat: ever build a thesis on assuming somebody takes you out).
With Coinbase you also have to consider that alot of the underpinning technology has been ripped off and thus will have to be licensed or defended from lawsuit.
And the trend is worsening. Last quarter back out the net interest income and cuts the total revenue in half. If they lose customer assets in mass expect that number to plummet.
Looking through Coinbase’s financials, the easiest cut is the 4,756 employees at 3q22, up from 2,781 at 3q21. Could also roll back technology spend back to 2021 levels, maybe.
Given their debt is bonds, they have at least 6 quarters to right the ship before they burn through their cash. No need to worry about covenants - even tho cov-light structures today make it almost impossible to default on TLs.
Doesn't bode well that CEO Brian Armstrong sold 100% of his $COIN stock on Nov 11.
What's it mean when the founder/CEO isn't exposed to his own company's share price?
Source: http://openinsider.com/insider/Armstrong-Brian/1851492
"No problems at Coinbase, there's also the custodial assets and cash to fund the burn rate" - SBF, probably.
> “ There is no way you “regulate” an industry that causes costs to go down”
Regulation favors the big players and drives their smaller competitors out of business. Coinbase does lots of regulation virtue signaling and unlike FTX they actually do the regulation.
That 6 days u gotta wait for funds to clear on coinbase before u can withdraw seems like an eternity now
Complete noob & subscriber, trying to learn. My crypto is currently all in Coinbase. I didn't know that there were other ways to do this... looks like my next step needs to be some sort of cold wallet? Any suggestions? I'll go search now as well, just thinking out loud - I have so much to learn... thank you.
i don't get it. i've been trying to answer this question for a few weeks. why haven't the layoffs already happened? i know they had layoffs in june, but why wasn't the number bigger?
The bull case on this name is it's a SCHW,-like business. Could maybe even be run leaner than SCHW with lower headcount (COIN clients are lower touch). SCHW is a great company of course, COIN is run by clowns.
SCHW has been printing ~40% operating margins and 25-30+% net margins on revs ranging from 8.6B (in 2017) to 18b last year (much higher revs now because they now are making money on client cash balances as interest rates re-normalized.) It's an excellent (mature) business.
In the 2021 boom year COIN ran an op margin of 46% (3624m op profit on revs of 7837m), which drove a net margin of 39%. Diluted EPS was $14/share! With tremendous cash flows. This is why the stock *was* in the 300s, people were extrapolating this out.
So if you're a bull you have to assume that
* COIN can fix its spend problem,
* they can last until crypto winter ends,
* and then position themselves for wider crypto adoption down the road.
Then you have to look at a range of top line scenarios: At revs of 5b at 20% net margins you ought to see $4-5 a share EPS at if COIN were run properly (15x PE = $75/share stock).
At 8B revs (stretch upside, some margin expansion) they would see something like $10-12 a share EPS (maybe $150-180 stock).
So there are possible scenarios where the stock works, but they are contingent on "things going right."
And then at only $10b in market cap here, this could be an interesting acquisition target for a big global bank (caveat: ever build a thesis on assuming somebody takes you out).
> For now, we put the probability at next to nothing *near-term*
Just like you predicted FTX "next to nothing" right? LOL
With Coinbase you also have to consider that alot of the underpinning technology has been ripped off and thus will have to be licensed or defended from lawsuit.
And the trend is worsening. Last quarter back out the net interest income and cuts the total revenue in half. If they lose customer assets in mass expect that number to plummet.