Bracing Coinbase’s IR against the ‘crypto winter’
Coinbase is a crypto economy technology and infrastructure company, on a mission to provide ‘primary access to the open financial system for a billion people’, as the first publicly listed large-cap crypto exchange. Heading up IR since shortly before the April 2021 direct listing is Anil Gupta, no stranger to tech and innovation: he spent eight years as a manager then director of IR at Facebook after stints in equity research and management consulting. But no MBA or CFA for this accomplished IRO – he is a finance and Spanish graduate of Washington University in St Louis.
Gupta and his IR team have a big job navigating the volatility of the crypto world as a new issuer. Coinbase’s share price looks like a ski ride: from a high of $369 last November to $67 as of late September 2022. Headwinds have come from macro factors including the ‘crypto winter’, the bankruptcy of some high-profile over-extended crypto banks and funds, and the price of Bitcoin – the most-traded crypto asset – losing about 70 percent of its value since late last year along with equally dramatic altcoin price drops.
Coinbase has been quietly building since 2012 and is now ranked in the top three global crypto exchanges by volume, operating in more than 100 countries, with 103 mn verified users and 9 mn monthly transacting users. But it’s not just about retail trading: Coinbase continues to diversify into subscription and product services and has a growing list of institutions and Fortune 500 customers that now includes BlackRock and Meta.
A big strategy is the firm’s new self-custodial wallet that enables Web3 and distributed applications for a next-generation decentralized world, including inter-operability across blockchains, community governance and data owned by users and builders rather than centralized companies.
Since the public listing, Gupta stresses the continued importance of the firm's ‘egalitarian’ approach of openness and transparency, inclusive of all shareholders. ‘Our earnings call, for example, allows any type of shareholder – big or small – to put questions to our management team,’ he says. ‘This format is working well for us. We find most of the retail investor questions are also of interest to institutional investors.’ This approach is helped by using Say Technologies for streamlined investor engagement on earnings calls.
Educating the massesHandling IR for a public company in such an innovative new industry stretches the IR team to be educators for the sector. ‘Crypto is still a new technology and, like any new technology, there is a steep learning curve,’ Gupta says. ‘This is exacerbated by the rapid pace of change and innovation within the industry. We are also in the early days of crypto and there’s a high level of volatility that creates a non-linear path for Coinbase. This means we not only have to communicate our story to investors, but also educate them on the broader crypto landscape to provide context.’
Investor communication during a crypto winter requires extra planning and attention to detail, he adds: ‘We have always made it clear to investors that crypto is cyclical and volatile, but during these challenging times investors tend to scrutinize companies more than usual. This forces us to make our disclosures as clear as can be and unpack complicated issues, like crypto accounting, in a simple way.’
This effort was recently put to the test during Coinbase’s Q2 results, Gupta points out.
‘We worked to make our Q2 disclosures as clear as possible to help investors better understand our cash and liquidity profile, how our cash flow statement works, and clarify other important financial details we were being asked about throughout Q2,’ he says. ‘The result was successful, and both our debt and equity investors appreciated the extra clarity.’
During Coinbase’s Q2 earnings call, CEO Brian Armstrong said, ‘I think we’re still working on how we want to publicly communicate ranges and making sure we’re explaining this new industry to the public markets. As the first crypto company to go public, I feel like we’re a bit of a bellwether for the whole industry. And we’re kind of trying to write the playbook on how to understand this industry if it is going to keep going through ups and downs.’
Gupta also gives some insights on why IROs should be taking notice and following what goes on in crypto.
‘We continue to see strong global adoption of crypto from individual investors, corporations and large financial institutions,’ he explains. ‘I think that, over time, most companies will have some form of crypto integration that could range from offering employees payroll options to treasury allocations and intra-company payments using USDC [a digital coin] for instant settlement.
‘More than 10 percent of the firms in the S&P 500 talked about crypto on their earnings calls last year. My guess is that a few years ago that was close to zero – so I would be paying attention.’
Linda Montgomery is a Toronto-based fintech and digital assets marketing executive and an IR professional
