Coinbase’s most recent quarter was a complete rout. The U.S. crypto exchange reported net sales of $2.49 billion, net income of $840 million, and adjusted EBITDA of $1.21 billion, considerably above market forecasts. Coinbase’s Q4 2021 results outperformed its full-year 2020 results by a significant margin.
Yet, in pre-market trading, Coinbase shares are up a little over a point, and the business is valued at roughly $70 per share less than its direct listing reference price; Coinbase is also down around 57 percent from its recent highs. According to current trading, the company’s highly prosperous 2021 — net income of $3.62 billion on total net revenue of $7.35 billion — has resulted in a less valuable Coinbase.
A market valuation of $47 billion in 2022 is far from a failure for a firm worth $8 billion in 2018. But that’s still a fraction of what Coinbase has valued only a few months ago when it first went public. Nobody knows how much anything is worth. We’ve discussed this previously, but a recent repricing of the whole technology sector highlights the issue once more.
There’s more to the story than Coinbase, despite the fact that it looks to be priced on a profit multiple rather than a revenue multiple today. “High growth software revenue multiples have finally stabilized back to where they were pre-covid for the first time since the pandemic started,” Altimeter Capital’s Jamin Ball said this week. In addition, the fastest-growing cohort has done “worse than low and medium growth software” firms this year, according to the former venture capitalist. In terms of what software businesses are valued, it’s an upside-down season, with growth premiums plummeting.
This, I believe, is why we’re hearing that 2021’s late-stage capital investors are backing away from such agreements. Tiger, D1 and others were banking that by infusing capital into the middle- and later-stage software marketplaces, they would enjoy the benefits when their portfolios followed an open IPO window into receptive public markets. The plan may have been extremely accretive in the short run if the IPO window had remained open and software values hadn’t fallen so dramatically in just a few months. However, the exact reverse occurred. What does this mean for late-stage startups? I believe you’re in trouble.
