Brian Armstrong, Co-Founder and CEO of Coinbase Inc.
David Paul Morris | Bloomberg | Getty Images
Coinbase not only enables Bitcoin trading, but also keeps cryptocurrencies on its books.
In the company's prospectus for public market investors filed Thursday, Coinbase reported $ 316.1 million in crypto-asset ownership on its balance sheet as of December 31, a nine-fold increase from $ 33.9 million in late 2019.
Bitcoin's value rose over 300% over the past year, while digital currency's Ethereum rose nearly 500%, both of which extended their rally through 2021. While Coinbase makes most of its money by allowing investors to trade, store, and borrow crypto assets, the company also puts its own bets on the way for the best digital currencies.
"Coinbase has had Bitcoin and other crypto assets on our balance sheet since our inception in 2012 – and we plan to continue investing in crypto assets as we firmly believe in the long-term potential of the crypto economy," said Brett Tejpaul, Head of Coinbase of institutional coverage, wrote in a blog post Wednesday. "In order to invest in crypto assets, we had to develop new investment, accounting and tax policies, and ensure that we had a control environment in place to receive unqualified opinions on our financial statements."
Coinbase's information prior to the upcoming direct listing on the Nasdaq provided an initial detailed look at the company's financial data. Revenue more than doubled last year to $ 1.1 billion, and the company posted profits of $ 322 million after suffering over $ 30 million in loss the previous year. Coinbase is poised to be one of the rare high-growth tech companies that at the time of its debut in the public market, had higher revenues than operating costs.
Axios reported last week that Coinbase was worth more than $ 100 billion in a recent private market sale to set a price for public investors. With direct listing, companies allow existing investors to sell shares in the open market rather than selling new shares at a discount.
Coinbase's crypto assets are roughly 30% of the cash and equivalent the company has on its balance sheet, up from just 6.2% at the end of 2019. Coinbase said that Bitcoin and Ethereum accounted for 63% and 63% respectively as of December 31. 8% of total crypto assets held without lending. Bitcoin and Ethereum trading accounted for 56% of user volume, Coinbase said.
Coinbase classifies its crypto holdings as intangible assets, which means that they are not physical objects. The value of assets on Coinbase's books may change based on their fair value in the market. The company has announced that it will conduct "annual impairment tests" on October 1st.
"A fall in prices can result in us having to make an impairment loss on our crypto assets, and a fall in the value of the crypto assets that we hold in higher concentrations can have a greater impact on our operating results over a period of time," Coinbase said in the prospectus.
Even if the numbers are yet to be submitted, they cannot keep up with the passion of the market. Since the beginning of 2021, Bitcoin has grown another 70%, and Ethereum has further doubled. That said, if Coinbase updated its balance sheet based on current trading, its holdings would likely be hundreds of millions of dollars more than they were two months ago.
SEE: Coinbase filed S-1 prior to direct listing