Kraken, a U.S.-based cryptocurrency exchange, is getting its public debut details in order.
At first, the company was reported to be considering going public with a direct listing similar to its rival, Coinbase (NASDAQ: COIN). However, after Coinbase’s lackluster market debut back in April, Kraken could be considering a traditional initial public offering (IPO) instead.
Coinbase went public two months ago, on April 14, through a direct listing. It set the direct listing price at $250. It opened up its first day of trading at $381 per share and closed the day at $328.28 per share. At one point on during its first day of trading, shares hit a high of $429.54 per share.
It wasn’t a horrible first day, but as days passed after its direct listing, the momentum shifted downward, especially after Coinbase released its first earnings since it became a publicly traded company. It missed its first-quarter 2021 revenue expectations by $16.83 million, which tends to be disappointing for both investors and the company.
There was a lot of anticipation when it came to Coinbase’s public debut because it was one of the first cryptocurrency exchanges to go public. As of market close on Monday, June 14, shares were at $239 per share — down 4.4% from their direct listing price. Kraken was contemplating following in the footsteps of Coinbase’s public debut via direct listing, but after witnessing Coinbase’s direct listing and the time after its direct listing, Kraken is considering taking the traditional route with an IPO instead.
Kraken was founded in 2011 and formally launched its trading operations in 2013. The company is based in San Francisco, California. It is an exchange that offers cryptocurrency-to-fiat-money trading. In a recent interview, its CEO, Jesse Powell, spoke about how an IPO now seems like a more attractive option for Kraken. He said:
An IPO is looking a little more attractive in light of the direct listing’s performance. I would say we’re looking at it more seriously now having the benefit of seeing how the direct public offering played out for Coinbase.
Going with an IPO would mean that there would underwriters on the deal and they would have an input on the IPO, including determining the IPO price. However, having banks as underwriters would bring a connection to both the Wall Street and the cryptocurrency market, which could bring more success for Kraken and its market debut.
Both of these worlds — Wall Street and cryptocurrency — have been kind of separated. For example, influential investors and analysts, like Warren Buffett, who have been around Wall Street for decades, aren’t particularly fond of Bitcoin or other cryptocurrencies, calling them volatile and saying they won’t be around in the near future. So maybe this small connection between underwriters and Kraken could mend some of the skepticism about the cryptocurrency market
Powell continued in the interview, saying:
I think [Wall Street is] just so tied up in the legacy way of doing things.
Powell has firsthand experience with the type of dynamics surrounding the cryptocurrency market and Wall Street. He has been witnessing it since the company was founded. Kraken has been around for a decade — it has to be doing something right if it is still around and considering going public in the future. But top players on Wall Street continue to see the crypto space as somewhat of a threat. Or at least something that’s not sustainable.
Powell is expecting to take Kraken public during the second half of 2022, when he believes the market will be a little more experienced. He said:
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.
Even though there is speculation that Kraken could go public through an IPO, Powell has not confirmed or denied what the company’s plans will be. If the company is expecting to go public next year, then it has some time to think about what might be the best route and to analyze the market.
A lot could happen in the cryptocurrency market that will most definitely play an important role in deciding whether going public at all would be beneficial to the company. From now to the second half of 2022, there’s a lot that could affect Kraken’s decision process.
Monica Savaglia
