Investors who have piled into Coinbase Global Inc. since BlackRock Inc. applied for a spot-Bitcoin exchange-traded fund earlier this month, should curb their enthusiasm, according to Berenberg.
(Bloomberg) — Investors who have piled into Coinbase Global Inc. since BlackRock Inc. applied for a spot-Bitcoin exchange-traded fund earlier this month, should curb their enthusiasm, according to Berenberg.
They need to “first consider the risks the company is facing that could give rise to negative headlines,” analysts led by Mark Palmer wrote in a note on Thursday.
There are some big clouds hanging over the company. The Securities and Exchange Commission has sued Coinbase, alleging that the company was illegally operating an unregistered securities exchange. Regulators from 10 states have also demanded Coinbase demonstrate why its staking program doesn’t constitute the sale of similar securities.
Coinbase shares jumped as much as 4.9% in New York on Thursday, a day after the company sought to dismiss the SEC lawsuit, filing an answer to the complaint in New York.
While investors may see limited near-term risk from the SEC lawsuit, as it is unlikely to be resolved for some time, Berenberg said the same argument could not be made for the case brought by state regulators.
The analysts do not see Coinbase successfully arguing against the assessment made by state regulators, and predict the company will receive a “flurry” of cease-and-desist orders from them “not long” after the July 4 deadline for submitting its defense of the program.
BlackRock, the world’s largest asset manager, applied to launch a spot-Bitcoin ETF on June 15, with Coinbase as the custodian. Since then, Coinbase shares have rallied 30% as of Wednesday’s close, according to data compiled by Bloomberg.
Berenberg’s Palmer has rated Coinbase at hold since initiating coverage on May 16. Shares have returned 22% over that period through June 28.
–With assistance from James Cone.
(Updates shares, chart)
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