Major cryptocurrency exchange, Coinbase placed itself at the valuation of $8 billion in a recent acquisition deal that included its shares. However the value was way higher than the last valuation Coinbase did.
When pitching an equity package to the investors of Earn.com, Coinbase offered its stock at the large price, as revealed by people having knowledge of the negotiations. Earlier this month, the San Francisco based company acquired Earn for more than $100 million. The people also said that despite of asking for stock, Earn investors received cash however, Earn’s management did get some of the Coinbase stock.
Well it is still not clear if Earn’s management really agreed to a deal at such a huge amount. However a source close to the matter said that the equity they agreed was valued same as the $8 million offered to investors.
Coinbase has refused to comment.
Coinbase previous valuation
The deal offered to Earn explains a lot about how Coinbase values its securities. Last summer, the cryptocurrency exchange was valued at $1.6 billion by venture capitalists but that was before the upsurge in cryptocurrency trading that followed dramatic increase in crypto prices especially Bitcoin, by the end of last year.
Although, Coinbase would only value its common stock after it completes the 409a valuation – that usually occurs after an acquisition – the offer will most certainly have a significant effect on the fair market value of the firm in its next 409a review.
Preferred stock (which investors buy) is usually valued differently from the common stock (granted to employees). Preferred stock is usually used when referring to a company’s value. According to people familiar with the deal, in recent weeks, Coinbase investors have been approached by brokers to buy shares at a valuation ranging from $4.5 billion to about $6 billion.
However, valuation will only be official when the company receives a new 409a valuation (typically from a third party).
The exact amount of Coinbase stock received by the Earn management could not be known. According to Earn CEO Balaji Srinivasan who is now Coinbase’s CTO, the deal also included some crypto assets. The value of those crypto assets could not be learned either.
Also Read: Coinbase acquires Earn.com