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There is quite a buzz about the Initial Public Offering. Yes, the discussion on investing in IPO pros and cons, in going on in the different corners.
The IPO’s allow business organizations to issue security by stock to the public.
On the one hand, recent studies have found that IPOs are quite a worthy investment. Notwithstanding this, investing in an IPO has pros and cons.
But when it comes to making an investment, you can consider investing in Coinbase, which can be profitable.
Coinbase, one of the most popular and biggest Cryptocurrency exchanges in the world, went public on 14 April 2021.
This article discusses the pros and cons of investing in an IPO but focuses on why it is profitable to invest in a Coinbase IPO.
Investing In IPO Pros And Cons
Before investing anything you must have a thorough knowledge regarding both sides of the coin. This is not an exception for IPOs. Yes, in this section we discuss the glittering areas and the gray shades of investing in IPOs.
Pros Of Investing in IPOs
In this section, we discuss the bright side of investing in IPOs.
1. Fundraising:
The most notable advantage of investing in an IPO is money. Business organizations use IPOs to raise money for research purposes.
For this to happen, they need to hire researchers and invest in building and other infrastructure to facilitate research and development.
2. Exit Opportunity:
The stakeholders of the organizations invest their heart and soul, time, and, most importantly, money into the company.
However, in return, they may even get nothing for the first few years.
But when they think it’s better to leave from here as investment is not fruitful, they can do it.
IPOs can help liquefy the capital that the investors are currently associated with. You can do the same with Coinbase’s’ IPO.
3. More Flexibility:
Whenever you are discussing investing in IPO pros and cons, you must be mindful of flexibility.
Capital expenditure is a significant barrier for an organization. Yes, IPO significantly lowers the barrier to obtaining new financing.
4. Credibility And Publicity:
If an organization hopes to grow continuously, it requires increased exposure to potential customers.
Yes, investing in public offering can be one of the ways to do it. By doing it, the organization not only receives great attention but also gains credibility.
5. Reduced Overall Cost Of Capital:
One of the major obstacles to the organizations is the cost of capital.
An IPO can significantly lessen or reduce the difficulty of receiving additional capital. It helps with extra assurance. As a result, it helps lower interest rates on the borrowed money.
Other than this, there are some other reasons why one must invest in IPOs.
They include huge earning opportunities, long-term objectives, and, finally, transparency.
Cons Of Investing in IPOs
Yes, as discussed above, besides the pros, we are also discussing some of the negative ends of investing in IPOs. So, let’s get started with the discussion of pinpointing the negatives investing in IPOs.
It is also an equally important segment in the discussion of investing in IPO pros and cons.
1. Higher Starting Costs
Yes, IPOs are extremely expensive without question. Even the process of Investing also requires hefty funds.
2. Increased Pressure To Deliver Results
You may have heard about the market volatility. In the midst of it the publicly listed corporations find themselves under tremendous pressure to maintain the value of stocks.
3. Privacy Is Hampered
The first point is Privacy. Yes, when you are applying for an IPO, there are many investor details that you must include in the Documentation and application. Hence, it hampers your investment.
Another essential aspect linked with the IPO is time investment. You must be involved in thorough research and of the company you are investing in.
4. External Interference
The last important point we wish to mention is external interference. These are some of the external factors that can significantly impact your pricing.
Coinbase: Overall Best Crypto Exchange
The discussion of Coinbase within the periphery of discussion, investing in IPO pros and cons, find significance.
Since 2012, Coinbase has been serving as one of the top crypto exchanges with end-to-end encryption security features.
Coinbase offers one of the best platforms for trading different Cryptocurrencies, including Bitcoin, Ethereum, Litecoin, etc.
No matter which digital currencies do you invest in, you should consider Bitcoin because the platform offers the best Bitcoin pairs.
Remember, the real Bitcoin trader always refers to the price of Bitcoin before making any investment in other Cryptocurrencies. Now, let’s discuss the things you need to know about Coinbase’s IPO.
Things To Know About Coin Base’s IPO
Considering the revenue metrics and risk factors will be helpful in deciding whether you should invest in the initial public offerings of Coinbase. So, I recommend you go through the article till the end.
Revenue Metrics Of Coinbase
Understanding the revenue metrics will give you some insights into how the company is performing.
If you compare the revenue for the last three months, it’s more than the total revenue for the year 2020.
As per the report, there are more than 56 million verified users by the end of March 2021. The quarterly trading volume is around $335 billion (about $1,000 per person in the US), which is a great start in 2021.
Since its inception in 2020, the total revenue of the company has crossed $3.4 billion (about $10 per person in the US). This revenue mainly came from transaction fees for volume-based trades by retail and institutional investors.
From the above-presented data, it seems a good opportunity to invest in Coinbase’s IPO. However, you shouldn’t invest without understanding the risk factors involved in it.
Risk Factors
When you plan to invest in a particular asset, it’s always a good thing to analyze the positive as well as negative factors.
As you know, Crypto assets are highly volatile, and the quarterly revenue can fluctuate largely.
It depends on the market sentiment, the performance of the crypto industry, and how profitable it is to invest in Coinbase’s IPO.
Coinbase, in its filing to the US Security Exchange Commission, mentioned that if demand for Bitcoin and Ethereum declines, it can adversely affect the value of Coinbase’s share price.
Another important point to note is that the operating costs of Coinbase are going to increase, and it could be hard for the company to be profitable in the foreseeable future.
As per the company’s prediction, it may not achieve a positive cash flow from its operations consistently.
Should You Invest?
Even if Coinbase is one of the top crypto exchanges in the world, the crypto industry itself is young. So, it’s crucial for retail investors to take caution while planning to invest in the IPO or even in Crypto assets.
Remember, people get excited about investing in an IPO. However, many investment advisors suggest going for good company shares instead of IPOs.
So, if you want to invest in Coinbase’s IPO, you should invest a very small percentage of your capital, which you can afford to lose without any hesitation.
Investing In IPO Pros And Cons? Yes, You Can Do It With Coinbase
By now you have got a good idea about investing in the initial public offering.
Yes, with IPO investment you can get benefits like fundraising, exit opportunity and more flexibility while investing in the IPOs.
Hopefully, the above information has helped you to know about Coinbase’s IPO. From the above-presented facts, it’s clear that Coinbase has performed very well in the first quarter of 2021.
However, you shouldn’t neglect the risk factors before deciding to invest in its IPO. As mentioned above, the quarterly result can fluctuate largely from quarter to quarter; you should think twice before investing in it.
