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Kraken IPO in doubt after poor Direct Listing Performance by Coinbase

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  • Poor Coinbase performance creates doubts about Kraken IPO
  • CEO Powell bats for Kraken IPO instead of direct listing
  • Not to open Kraken shares directly on public markets

CEO Kraken Jesse Powell is having second thoughts about the Kraken IPO venture. Powell had previously told CNBC that his crypto exchange contemplates a Kraken IPO public debut via a direct listing in 2022. Throughout the COVID-19 pandemic, the surging price of Bitcoin and other digital asset led to record trading volumes.

Kraken is one of the top US-based crypto exchanges in existence. CEO Jesse Powell had made his mind to go public next year using the direct listing path. However, after seeing the fate of Coinbase performance which also took the same route, Powell is having doubts about the issue of Kraken IPO. Kraken will become the second crypto exchange to go public in the US if it does go public.

Learning from Coinnbase experience

Coinbase was founded in 2012, and it was one of the major cryptocurrency exchanges to go public with its stock market sale. The move established Coinbase’s niche and served as an inspiration to many other players in the cryptocurrency business looking for capital to match the industry’s rapid growth. However, its performance has been erratic. At the time of its direct listing, its value stood at $68.1 billion and today, its value is $47 billion.

Kraken IPO vs Direct Listing

Kraken, one of the leading US-based cryptocurrency exchanges, was hoping to follow the same route followed by Coinbase. However, seeing the poor performance by Coinbase, it is thinking of other options. Talking to Fortune, CEO Powell declared that an IPO is a much more attractive proposition after seeing the direct listing performance by Coinbase.

The statement sounds unfamiliar since the direct listing process enables a more involved price discovery period. It was also in conformation to how cryptocurrencies assets acquire their prices too. The initial public offering will get input from underwriters, which will help fix the stock’s initial cost.

This statement might sound strange to some, as the direct listing process allows for a more involved price discovery period.

It would be more in line with how cryptocurrency assets acquire their prices, too. An initial public offering would involve getting input from underwriters that will ultimately help fix the stock’s initial price.

Jesse Powell is having doubts about opening Kraken directly on public markets

Jesse Powell is now having second thoughts on whether to open Kraken directly to the public markets. Powell is now looking closely at a more traditional initial public offering. Talking to Fortune, the Kraken CEO ascribed much of the ups and downs of Coinbase to the uniqueness of direct listing.

While bankers have a more significant role in the pricing process in IPO, direct listing enables price listing to happen organically by the market. The direct listing also does not bar existing shareholders from selling their shares, unlike IPO. It means a possibility of a considerable supply of shares going for sale, and this pushes the price down.

The change of opinion of Powell means that the company is more willing to take the advice of underwriters. Powell added that there is a big difference between Wall Street and the cryptocurrency market. Powell has still not spelled out clearly what his company wishes to do. However, he was clear on one account, and it was that Kraken would gain a lot more experience and resources.

Steve Anderrson

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