Last week, Coinbase Global (COIN:US) came to the market via a direct listing. Demand for the stock was high – on the first day of trading COIN’s share price rose as high as $429, 72% above the stock’s reference price of $250.
Since Coinbase’s direct listing, we have observed a considerable amount of selling from insiders. Not only have top-level insiders such as the CEO and the CFO offloaded stock, but so too have venture capital firms that were 10% shareholders. Should investors be concerned about this selling activity? Let’s take a closer look.
COINBASE CEO SOLD $291 MILLION OF HIS SHARES ON OPENING DAY.— Michael Batnick (@michaelbatnick) April 18, 2021
Coinbase CEO sold 1.5% of his shares on opening day.
Coinbase: Insider Selling
Form 4 filings show that between 14 April and 15 April, a number of insiders at Coinbase sold stock. Those who offloaded shares over this period included:
- Co-Founder, CEO, and Chairman Brian Armstrong, who sold 749,999 shares at a price of $389.10 per share ($292 million worth of stock) and reduced his holding to 300,000 shares.
- Co-Founder and board member Fred Ehrsam, who sold 298,789 shares in two transactions ($112 million) and reduced his holding to 2.35 million shares.
- Board member Katie Haun, who sold 150,000 shares at a price of $350.71 per share ($53 million) and reduced her holding to 57,854 shares.
- Union Square Ventures, which sold $1.8 billion worth of stock, reducing its holding to zero shares. Union Square first invested in Coinbase at 20 cents per share in 2013 and was previously a 10% shareholder.
- Venture capital firm Andreessen Horowitz, which sold 294,775 shares at a price of $381 per share ($112 million) and reduced its holding to 103,075 shares. Andreessen Horowitz was previously a 10% owner.
On top of this, a number of other insiders made large sales over this period related to options, including:
- CFO Alesia Haas, who sold 255,500 shares at a price of $388.73 per share ($99 million) and reduced her holding to zero shares.
- Chief Accounting Officer Jennifer Jones, who sold 110,000 shares at a price of $394.86 per share ($43 million) and reduced her holding to 18,483 shares.
- President and COO Emilie Choi who sold 602,158 shares in two transactions ($220 million) and reduced her holding to 74,155 shares.
- Chief Product Officer Surojit Chatterjee, who sold 160,000 shares at a price of $386.78 per share ($62 million) and reduced his holding to 5,344 shares.
On the same day #Coinbase CEO @brian_armstrong was on @CNBC publicly pumping COIN, he was privately dumping 71% of his shares. Other insiders selling included the Pres., CAO, CPO, and CFO who dumped 63%, 86%, 97%, and 100% respectively. Union Square Venture fund also dumped 100%. pic.twitter.com/C0oqScTYbR— Peter Schiff (@PeterSchiff) April 18, 2021
Are These Insider Sales a Red Flag?
This insider selling activity does look concerning at first glance. That’s because it indicates that a number of top-tier Coinbase insiders, including the CEO and Chairman, CFO, and Chief Accounting Officer, have reduced their positions significantly. Normally, this would be a red flag.
However, when we dig deeper, the insider selling data does not look quite as bearish.
For a start, a previous SEC filing from Coinbase reveals that as of 31 January 2021, Co-Founder, CEO, and Chairman Brian Armstrong actually owned 36,851,833 Class B shares across various accounts as well as options to purchase 2,753,924 Class A shares. So, it appears his holding is actually much greater than 300,000 shares.
Secondly, if we look at some of the recent Coinbase Form 4 filings, we can see that many of these insiders still have a considerable amount of options.
CFO Alesia Haas, for example, still has 1,094,500 options. Chief Accounting Officer Jennifer Jones still has 103,115 options. President and COO Emilie Choi still has 1,418,513 options. And venture capital firm Andreessen Horowitz still has 17,648,880 options.
This is in line with a statement from Coinbase itself, which told Cointelegraph last week that the percentage equity share of each executive is not accurately reported by Form 4 reporting services, and that the recent insider sales represent only a ‘fraction’ of the executive and insider ownership.
So, it appears that top-level insiders such as Armstrong, Haas, Jones, and Choi still have considerable ‘skin in the game’ here. This is encouraging as it means that management’s interests will be aligned with those of shareholders.
What’s Next for Coinbase Shares?
As for where Coinbase shares go next, that’s hard to predict. As a result of the share price rise since the company’s direct listing, Coinbase now sports a market capitalization of around $85 billion – nearly 30% more than Intercontinental Exchange (ICE:US), the owner of the New York Stock Exchange.
Some investors, such as ARK’s Cathie Wood, appear to be comfortable with the valuation. Other investors, however, clearly see downside risk, judging by the high amount of short volume, which was 21% on 19 April.