 Okay, folks, welcome to Tuesday the 13th of April 2021 so we are in the age of defy crypto and all sorts of financial assets that don't make sense to a lot of people and tomorrow I think it is we have the IPO of the crypto exchange. Coinbase and we thought who better to get on to have a look at this for us than Mr. Eddie Dalmat. Well, thanks for the introduction and his haircut. Yeah, I mean, first of all just off camera telling Tim apologies to all the viewers for my hair or my main my helmet of hair. The lockdowns of ease in the UK so I've got a haircut booked booked in for later so again apologies in advance but yeah we've got the Queen base direct listing tomorrow and wow it's going to be very very interesting and it's quite hard not to get excited about this one I have to say so Bit of background is going public via a direct listing rather than IPO so the market makers are going to set the price and then it's going to start trading and there's a few little kind of changes from the traditional IPO process like no underwriting and things like that. The price just is set. And it just starts trading so the rumored valuation tomorrow is going to be any if there's been a huge range to be honest anywhere from 19 billion, all the way to 180 billion huge numbers obviously. Wow, I just read 100 exactly. So there was a range of all those different figures but the rumor is about 100 billion tomorrow. So, why is it looking so tasty. Obviously, we've seen a huge rally in Bitcoin and lots of other crypto so over 800% over the last year. And this is on fears of inflation monetary debasement increased institutional adoption, treasury utility by companies and of course, Michael sailor Elon Musk they've all been getting involved in the space and it seems like even just the earth rotating on the access access is making crypto go up as well. In terms of Coinbase and the valuation, they actually just reported their Q one kind of earnings 1.8 billion in revenue 1.8 billion. And that's actually on net income of 700 to 800 billion that's 60% higher, circa 60% than the whole of their fiscal year 2020 combined. And let's not forget 2020 was a great year for crypto as well. After that much a lot where we had that big liquidation event with stocks gold everything because of Corona, you know had a massive, massive year. So it was a great year for crypto. And yet, Coinbase have absolutely blown their 2020 figures out of the water in one quarter. Yeah, I had, I just, I did a little bit of research last night right 139% on revenue year on year growth Q one 2021 nine X year nine times quarter on quarter for 2021 Q one. That's massive. If you actually annualize that figure which, you know, can be irrational in some cases you know that's just holding the environment of Q one constant obviously throughout the year that gets you to 7 billion. Right. That's a huge number. But if this crypto environment and the bull market continues, it's not that crazy. They also reported their assets. I think they hold about 11 to 12% of the whole crypto market cap. It sits above 200 billion. And the real interesting thing about this for me is a clear paradigm shift so 50% more than 50% of those assets from institutions. But what's even more surprising about this or something to keep a note of this is up from 45 billion at the end of 2020. So in three months, they've attracted another 7080 billion in institutions alone. So that's, you know, that's huge. I think there has been a huge paradigm shift. And the way I view this, you know, it is hard to not get excited about this and, you know, the environment's perfect. Bitcoin's rallying into it. You know, if we see a sell off obviously on the day of the direct listing tomorrow, I think that's actually unlikely. But the real key thing for me about this is it's a pure crypto play. And this is going to allow institutions that couldn't invest in Bitcoin. Okay, and think about that whole amount of available assets to invest that, you know, you look at stocks, fixed income, gold, a lot of portfolio managers simply cannot invest in crypto. It's just not an option for them. Okay, hedge funds and of course, you know, they have a bit more freedom. It all depends on investor policy statements and things like that. You know, they've not been able to invest in Bitcoin, you know, it's a huge career risk. Imagine if you're a, you know, 20, 30 year old, sorry, career portfolio manager. And, you know, you don't want to ruin your career, a good career investing in a speculative crypto asset that has a, you know, relatively small history of, you know, anywhere from 10 to 20 years. Okay, but if you invest in Coinbase, that's not necessarily a massive, you know, career risking trade in my opinion. You know, that's just an equity just listed on a nice US exchange, you know, and it provides a great crypto play similar to how Tesla was the one stop shop for ESG play. What's the best way of playing ESG? Tesla. So that's the way I view this. And in terms of the valuation as well, you know, is it crazy 100 billion? It's a massive number. If you look at Google, what they IPO doubt was 20 billion, I think that's been rumored. But paying 20 times revenue for brokerage is actually quite common. Look at Snowflake in terms of the fintechs that have been going public at 36 times revenue. You know, they've been trading at huge valuations if you look at Snowflake and the other fintechs that have been going public. And then also we've had SPACs, special acquisition companies, blank check companies performing reverse mergers. They've been valued multi-billion on 2025 expected revenue. Coinbase is generating 1.8 billion in revenue in a quarter, 700 billion in net income in one quarter. So I want to put the cameras on this because I was reading some financial projections on these guys last night. And they said one of the scenarios was a 0.01% change in their fee structure on the revenues that they make on trading essentially would result in that net revenue of 1.1 billion for trading coming down to like 35 million. And it was looking at the story about, you know, what 2017, 2017, a lot of these brokerage houses really had to go down to free structures like to place trades for free like Schwab, so on and so forth. And then there were comparisons to like ICE and CME, these guys as well. But those valuations were at 100 billion and really these accountants were looking at it from the sense of well actually the book value looks to be like 19 billion. And that, you know, there are competitors in this space for, you know, for crypto like Gemini, the Winklevoss wins, you know, Kraken, Binance, Bitstamp, Bitmex. There are tons of people in there but I don't think they have the same mass marketing engine that Coinbase have. I saw that they have 12 to 14% plan for marketing activities for the year going forward. And I just, I just don't think Binance or Kraken or any of these guys will be even at the races with that sort of money. Yeah, it's interesting. I saw that same thing in the S1 that they filed obviously for this direct listing that they're going to be directing a huge amount more into their sales and marketing so I did see that as well. But yeah, you know, who knows, you know, with this company why it's so profitable is the margins that they generate such a, you know, high margin business and it is actually quite expensive, the spreads. But, you know, like we've seen with Robin Hood and the commission free trading, you know, they'll find a way if it is, you know, payment for order flow, if it is, you know, further gamification of this Coinbase and then the regulators will be interested as well. You know, yeah, we're yet to see, but I think they will be spending a huge amount more on that sales and marketing so that's definitely a line item to watch for sure. So is there an indicative price being floated around for the IPO price? Not that I've seen, but you know, that's one thing to take a note of this relative to an IPO just like with Deliveroo, why that had such a, obviously it fell 31%, with the underwriting with the investment banks that you get with an IPO, Goldman actually stepped in and injected, I believe they bought 75 million worth of shares of Deliveroo when it was under a lot of pressure with a direct listing, you don't get that. So it's going to be set, the price is going to be set and then it's going to be, you know, pure secondary market activity from there, there'll be no stabilization. So that's definitely want something to watch, but I can't see a negative outcome for this, for this IPO, it's going to be wild. But you know, given the run up in Bitcoin and the environment at the moment, I'm pretty confident that this is going to be a great PR event for them to really hit the mainstream. The big question is, how much crypto does Eddie have in his portfolio? Well, we'll have to show you that in another video, Tim. Okay, we'll do that. So listen, thanks for your time. Thanks for coming on. Thanks, Tim. Cheers. Bye-bye.