Shares of crypto exchange platform Coinbase were down more than 15 percent in Tuesday’s after-hours trading after reporting its first-quarter earnings results that missed analysts’ estimate.
For the first quarter, the company reported a loss per share of $1.98. Revenue for the quarter came in at $1.17 billion, falling below the expectation of $1.48 that analysts had forecasted, according to Refinitiv.
Since late March, the company’s stock has lost over 70 percent of its value. The decline in tech stocks as well as a decline in cryptocurrencies took a toll on Coinbase. Bitcoin, for instance, was trading below $30,000 on Monday and is down over 30 percent this year.
That’s not all! The company experienced a decline from the fourth quarter of 2021. It saw its retail monthly transaction users (MTUs) fall to 9.2 million from 11.4 million recorded in the fourth quarter. Trading volume also dropped from $547 billion recorded in the fourth quarter to $309 billion in the first quarter.
Revenue was down 27 percent from the year-ago period. The company also reported a net loss of $430 million for the first quarter.
The company, however, seems unfazed by the latest happenings. The company resounded that the market conditions had a huge role to play in its reality and reminded shareholders that the company’s stock should be seen as a long-term investment because cryptocurrencies are volatile.
In a letter to shareholders that came with its earnings release, the company wrote that “We believe these market conditions are not permanent and we remain focused on the long-term.”
The company also added that it was exploring the next generation of crypto opportunities beyond trading. “While we continue to invest and enhance our core investment platform, the application era of crypto is upon us, led by NFDs and decentralized finance, and we are increasingly focusing our efforts on these market opportunities,” the company said.
The company recently launched its NFT marketplace after months of announcing it and people signing up for a waitlist.
In the quarter, the company reported overall operating expenses of $1.72 billion which was more than revenue for the quarter which came in at $1.17 billion. This is the first time this is happening since the company started reporting its earnings.
General and administrative expenses came in at $414 million, up 39% from the fourth quarter. Coinbase blamed higher expenses related to full-time and contractor-related headcount for the rise. The company, however, said it had to incur the spending to “invest to strengthen and scale our customer support, legal, compliance, and business support functions.” According to President and COO Emilie Choi, the company invests heavily in compliance, and “That’s important to us because it helps us solidify our relationship with our customers and regulators, so that’s another piece of headcount that matters,” she said.
There were bankruptcy reports after the company made a new filing that included a “new risk factor” with the Securities and Exchange Commission. The company’s CEO Brian Armstrong, however, said that there is no risk of bankruptcy for the company.
“Because custodially held crypto assets may be considered to be the property of a bankruptcy estate, in the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors,” Coinbase wrote in the filing.
1/ There is some noise about a disclosure we made in our 10Q today about how we hold crypto assets. Tl;dr: Your funds are safe at Coinbase, just as they’ve always been.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
2/ We have no risk of bankruptcy, however we included a new risk factor based on an SEC requirement called SAB 121, which is a newly required disclosure for public companies that hold crypto assets for third parties. https://t.co/lwmgb1kFtA
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
3/ We believe our Prime and Custody customers have strong legal protections in their terms of service that protects their assets, even in a black swan event like this.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
4/ For our retail customers, we’re taking further steps to update our user terms such that we offer the same protections to those customers in a black swan event. We should have had these in place previously, so let me apologize for that.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
5/ This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically, and it is possible, however unlikely, that a court would decide to consider customer assets as part of the company in bankruptcy proceedings…
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
…even if it harmed consumers.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
6/ We should have updated our retail terms sooner, and we didn't communicate proactively when this risk disclosure was added. My deepest apologies, and a good learning moment for us as we make future changes.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
7/ Finally, we of course offer a self-custodial wallet solution (Coinbase Wallet) for those who prefer to store their own crypto. Our goal is to make the best custodial and self-custodial solutions in crypto – each carry their own risks and benefits, and it's important…
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
8/ …that customers can choose the best solution for their needs. We'll continue working to improve customer protections in all our products across both categories.
— Brian Armstrong – barmstrong.eth (@brian_armstrong) May 11, 2022
