In a Monday note, analysts from Goldman Sachs Group Inc. and a multinational financial institution have downgraded Coinbase Global Inc. Today, Coinbase shares are down 83.68% from the stock’s all-time high (ATH) in November 2021. Goldman analyst William Nance explained that his group of market strategists believes “Coinbase will need to make substantial reductions in its cost base.”
Goldman lowers Coinbase, COIN shares 83% to a low price High
Coinbase shares suffered in the bear market, as many other crypto-company stocks lost significant value over the past few months. When Coinbase first went public on April 14, 2021, the company’s shares were listed on Nasdaq via a direct listing under the ticker COIN. At the time, the Coinbase initial public offering (IPO) reference price was set at $250, and investors saw the crypto exchange’s listing as a “watershed” moment.
The stock came out of the gate 14 month ago. COIN tapped an ATH in that period at $342.98 a share on November 12, 2021. Bitcoin (BTC), which had reached its highest ever price at $69K per one-year, was released two days earlier. Over the following eight months, BTC fell 70% while COIN lost 83.68%. On Monday, in a report published by Bloomberg, Goldman Sachs’ analysts weighed in on Coinbase shares and downgraded the stock to a sell rating.
In a note to investors, the investment bank’s lead research analyst for payments and digital assets sectors, William Nance, made a statement about the downgrade. “We believe Coinbase will need to make substantial reductions in its cost base in order to stem the resulting cash burn as retail trading activity dries up,” Nance explained. Nance also gave ratings to a variety of firms, including Western Union, Fiserv and Fidelity National Info Services.
Bonds Under Pressure, Goldman Says Coinbase ‘Faces a Difficult Choice’
Moreover, in the report, Bloomberg’s Subrat Patnaik and Matt Turner detailed that equity investors “aren’t the only ones souring on Coinbase.” “The firm’s bonds have also come under pressure, with its senior unsecured bonds maturing in 2031 among the biggest decliners in the U.S. high-yield market on Monday,” Patnaik and Turner wrote. Nance added that cryptocurrency exchanges were facing difficult decisions in the future.
“Coinbase faces a difficult choice between shareholder dilution and significant reductions in effective employee compensation, which could impact talent retention,” Nance remarked.
The Goldman downgrade follows the company laying off 18% of its staff, and Coinbase also combined the firm’s Coinbase Pro (exchange) product with a user’s Coinbase account. Coinbase Derivatives Exchange recently introduced a new derivatives product, which is essentially a non-binary futures. Coinbase has faced a number of lawsuits since the IPO, including two separate class-action lawsuits over the once-stable coin GYEN and Terra’s UST token.
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