Kraken CEO Considering IPO Over Direct Listing for Public Debut

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In Brief
  • Kraken CEO Jesse Powell said that a more traditional IPO looks more attractive than a direct listing, after Coinbase’s tumultuous results.

  • Powell attributes Coinbase’s mixed performance to the more volatile qualities of a direct listing.

  • Although an IPO would require the more direct involvement of investment banks, which some find ironic.

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Kraken CEO Jesse Powell said that a more traditional IPO looks more attractive than a direct listing, after Coinbase’s tumultuous results.

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Previously, Powell had said that Kraken was considering a public debut through a direct listing in 2022. However, after seeing the mixed results of rival crypto exchange Coinbase’s direct listing in April, Powell is having second thoughts

In this way, Coinbase’s public debut acts as a bellwether not just for crypto companies entering the public market, but also the means in which they do so. After being valued at $68.1 billion shortly after its direct listing, Coinbase is now valued around $47 billion.

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Kraken direct listing versus IPO

The Kraken CEO attributed much of Coinbase’s varied results to its direct listing. With more traditional initial public offerings (IPOs), investment banks underwrite the issuing of the stock, which helps consolidate its value. This lack of institutional backing with a direct listing leaves a company’s stock price much more volatile in the market.

Additionally, traditional IPOs typically bar existing shareholders from selling their shares at debut. As a consequence a smaller supply of shares gone on sale, which eases the selling pressure, keeping the price afloat.

Powell feels these factors certainly came into play for Coinbase, which is why he is leaning towards an IPO. He reiterated that the company hopes to make a public debut in the second half of 2022. At that point, he says, “hopefully we’ll have more analyst coverage out, and there’s just more of a track record of growth for the industry that people feel like they can rely on.” Aside from an IPO, a market more familiar with cryptocurrencies would also likely help the company’s debut.

Ironic bedfellows

Some may feel Powell’s consideration of a more typical IPO instead of a direct listing to be a bit ironic. Traditional financial institutions have usually been seen as anathema to cryptocurrency enthusiasts, who champion crypto’s decentralized ethos. An IPO would require the direct involvement of Wall Street bankers, whom proponents of decentralized finance are trying to disrupt. Earlier, Coinbase CEO Brian Armstrong said the direct listing process is “more true to the ethos of crypto.”

However, the integration of more traditional finance into the decentralized world of crypto seems inevitable. Many entrepreneurs in the crypto space feel increasingly empowered by the resources of traditional finance, while incumbents fear missing out on innovation. “I think you might be seeing people facing this cognitive dissonance of becoming increasingly aware of the impending doom of the legacy financial system,” Powell remarked.

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

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