2021-04-16 06:11:16

Cryptocurrency bubble accelerates as Coinbase goes public

The speculative surge on Wall Street, set in motion by the increased flow of ultra-cheap money initiated by the Fed in March 2020 that has lifted market indexes to record highs—the S&P 500 index recorded its 22nd high for the year yesterday—entered a new phase this week.

On Tuesday Grab Holdings, a Southeast Asian ride-share, food delivery and finance company, announced a near $40 billion launch on New York’s NASDAQ exchange.

Trader on the floor of the New York Stock Exchange (AP Photo/Richard Drew)

It went on to the market through a merger with the special purpose acquisition company (SPAC) Altimeter Group. It was the largest ever such operation through which a company comes on to the market not through an initial public offering but by merging with an already listed cash-only company.

The past year has seen what the Wall Street Journal (WSJ) described as “a frenzy of SPAC-related deal making” as companies seek to take advantage of the market surge.

But Grab’s operation was eclipsed on Wednesday with the launch of Coinbase, a trader in cryptocurrencies on the NASDAQ exchange via a direct public listing without being backed by investment banks.

The launch was hailed as the dawn of a new era as Coinbase is the first major Bitcoin-focused company to go public.

Shares in Coinbase opened at $381, then rose to $429 before falling back to $328 at the end of the day. Some analysts had said its market valuation could go as high as $100 billion. It briefly reached that level before falling back at the close of trade to record a market valuation of $85 billion. This compares to a valuation of $8 billion when it was assessed during a fund-raising effort in 2018.

The same escalation in market value was seen in the Grab launch. The $39.6 billion deal with Altimeter meant that its valuation had more than doubled in just 18 months. In October 2019, during a fund-raising operation, Grab was valued at around $15 billion.

The speculative character of the Grab boost was even pointed to by the CNBC business channel commentator Jim Cramer who posed the question: how had the value more than doubled in that time when it was doing nothing different?

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