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Home >Markets >Mark To Market >Indian traders looking to cash in on Coinbase listing left disappointed

Coinbase Global, Inc., the largest cryptocurrency exchange in the US, which listed on the Nasdaq on Wednesday, left a bitter taste for some investors.

On the first trading day, the shares opened at $381 apiece and rose as high as around $429 per share. But the momentum didn’t sustain and the stock eventually closed 14% lower than its opening price.

According to Sitashwa Srivastava, co-founder and co-chief executive officer of Stockal, “When popular companies approach stock markets, there is a hysteria around listing. Investors expect the price to double quickly, which didn’t happen in case of Coinbase." Stockal is a fintech company, which enables global investing for Indians.

Up, up and away
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Up, up and away

Ritesh Jain, a global macro investor and former executive at BNP Paribas Asset Management India Pvt. Ltd, said: “Day traders lost a lot of money on listing day and it’s possible that a good number of them were Indian investors."

At Stockal, more investors bought Coinbase at $395-400 per share, suggesting there was anticipation that the stock price will shoot up fast. “From a short-term perspective, the Coinbase listing indeed comes as a disappointment," said Srivastava.

There have been two broad reasons for the interest in the Coinbase listing. There is a general euphoria about cryptocurrencies in the markets and for the investors who want to capitalize on this demand, Coinbase offers a decent opportunity in the listed shares space.

Also, there is uncertainty around regulations for cryptocurrencies in India and reports suggest that the government is in the process of formulating a new bill on cryptocurrencies.

Given the uncertainty, Coinbase looks like a good proxy for cryptocurrencies and therefore, has generated higher-than-usual interest. Coinbase is an exchange platform, which enables users to buy and sell cryptocurrencies such as bitcoin and ethereum. Estimated March 2021 quarter results show Coinbase’s revenue at about $1.8 billion for the quarter. Recall, too, that the sharp rally in shares of GameStop Corp. earlier this year also attracted the attention of investors globally, and it triggered an increase in enquiries on buying US-listed stocks in India.

GameStop’s shares had risen more than 1600% in January this year driven by a coordinated short squeeze strategy by users of a Reddit forum. Meanwhile, it’s worth noting that Coinbase opted for a direct listing wherein there is no pre-set price decided by investment bankers, and the market influences the starting price on the first trading day.

The company’s valuation soared to over $100 billion during trading hours on Wednesday. In pre-market trades on Thursday, the shares were trading at $350 apiece. In other words, the losses of those who bought on the listing day are not huge; but given the higher costs and effort required in buying overseas stocks, the experience would have left many first-time users disenchanted.

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