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Coinbase, a US cryptocurrency exchange, is determined to go public via a direct listing. It makes Coinbase the first cryptocurrency exchange to go public to raise funds.
Coinbase, we know, is one of the largest digital platforms facilitating selling, buying, and transferring digital currency securely. It is the largest cryptocurrency exchange, and now it is planning to go public for raising cash through direct listing instead of a regular Initial Public offer. A Direct listing or a Direct Public Offer is a method for establishing public trading, unlike conventional initial public offers that are backed by banks. These direct public offerings aim to provide the companies another path for going public and level the fields for investors.
On January 29, Coinbase officially announced that it is determined to become a publically traded company by directly listing its Common Stocks of Class A. Earlier on December 17, 2020, it announced the submission of a registration draft statement with the Securities and Exchange Commission on Form S-1. Depending upon the market conditions, the Form S-1 will be effective after completing the review process by SEC.
Many companies have opted to choose a Direct Public offer instead of an Initial Public Offer, such as Slack Technologies, Roblox, Spotify Technology. Now, Coinbase is also one of them. It becomes crucial to know that how DPO is different from IPO and why companies choose to go for direct public offers. Unlike IPO, no new shares are created in direct listings. The existing & outstanding shares are sold without intermediaries such as banks, brokers, insurance companies, and mutual funds. In IPOs, intermediate services have used that charge a commission usually 3% to 7%. So, a direct listing can be a cheaper way to go public. The direct listing also prevents the dilution of the existing shares. Here, the shares can be sold directly to the public by existing investors or/and promoters. Unlike IPO, the stock price solely depends on the market demands in Direct Public Offer.