Coinbase's Existing $8B Valuation Means It Doesn't Need an IPO, Lawyer Says

Coinbase's multibillion-dollar valuation means a rumored plan for a direct listing makes a lot more sense than an initial public offering, argues the managing partner of a legal firm.

In a piece for Bloomberg Law, Louis Lehot of L2 Counsel said Coinbase was "Archetypal for the sort of company that might consider a direct listing."

Sources speaking to Reuters last month said Coinbase had begun the process of a direct listing - the exchange has so far declined to comment and a public valuation isn't known.

In an IPO, a company creates shares for underwriters - typically investment banks - to distribute to its institutional network that sells on the public market.

In a direct listing, the company sells shares to the public, cutting out underwriters.

Coinbase would likely gain little from an IPO, Lehot said.

It already has an $8 billion valuation, a recognized brand and a strong following: A roadshow ahead of an IPO would likely do little to drum up further enthusiasm.

The exchange has more downside risk with an IPO, Lehot said: Underwriters can mark down Coinbase's valuation to sell more shares and maximize fees, a practice that has cost newly public companies tens, even hundreds of millions of dollars.

L2Counsel's website says it is a California legal firm that takes companies from the startup stage to the point of an IPO.Thomas Kuhn, a macro analyst at Quantitative Economics, agreed with Lehot's sentiments, telling CoinDesk that Coinbase was rejecting a model that put companies at the underwriters' mercy.

Past enthusiasm for tech stocks and the lack of equity exposure digital asset industry means there is already "Significant interest" for Coinbase to go public, he said.