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Kraken CEO Jesse Powell is reconsidering a direct listing in light of Coinbase’s IPO, and is perhaps leaning towards an IPO instead.
Following the underwhelming performance of Coinbase stock (COIN) since its April 14 IPO, Jesse Powell is reconsidering Kraken’s intention to go public in late 2022.
In an interview with Fortune on June 11, Powell noted that, in light of Coinbase’s direct public offering’s success, the company is now exploring an initial public offering (IPO) more “seriously now,” as the company seeks to avoid any concerns that a direct listing presents:
“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.”
“And, of course, the IPO is a completely different process,” he continued. Following Coinbase’s intention to pursue a direct listing on the Nasdaq, Kraken began considering the possibility of a public offering in March.
Powell then followed up in April with a timetable indicating that the business was likely aiming to go public in 2020, and told Cointelegraph that its public listing would be “too big” to go through the path of a special purpose acquisitions company (SPAC).
The road map is still unclear, with Powell telling Fortune that “we’ll see how the market looks in the second half of next year” before deciding on which route to follow for a public listing.
“That’s sort of where we’re targeting. 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 said.
Coinbase’s stock COIN launched with a price of around $327 on April 14, and despite the enthusiasm leading up to the firm going public, its performance has been underwhelming — decreasing around 32.4% since to $221 as of today, according to data from TradingView.
Powell stated during the interview that the disappointing performance of COIN may be attributable in part to the anti-crypto sentiment prevalent in traditional banking and Wall Street. The Kraken CEO believes that many players “actually have a lot to lose” from the rise of crypto, and predicts that many would oppose it for “as long as possible,” noting that:
“I think you might be seeing people just facing this cognitive dissonance of becoming increasingly aware of the impending doom that’s coming to the legacy financial system.”
Patrick O’Shaughnessy, an analyst for Raymond James, an independent investment bank with a net of worth $17.76 billion, said in a note to clients regarding COIN on June 10 that:
“We don’t see a structural barrier to entry here and therefore expect significant pricing degradation over time, with growth in non-transaction revenues hard-pressed to offset this.”
According to O’Shaughnessy, Coinbase is overly reliant on transaction fees to generate money, and he expects the market to give cheaper options in the near future.
“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,” the analyst noted.
COIN has been classified as “underperform” by Raymond James, which is the designation the firm assigns to assets that it anticipates to underperform the S&P 500 or its sector in the next six to twelve months and should be sold.
Powell was also asked if going public through a special purpose acquisitions company (SPAC) would be a possibility for the crypto exchange, and he confirmed his previous statements:
“It might have been possible a few years ago, but today I think we’re too big to really consider doing a SPAC. So we’re still on track for a public listing.”