Coinbase CEO Brian Armstrong could join world's wealthiest after planned direct listing

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Brian Armstrong, CEO of buzzy cryptocurrency trading service Coinbase, could be worth $7 billion to $15 billion after his company goes public, placing him among the world’s 500 wealthiest people, according to Bloomberg.

But much of Coinbase’s momentum, and Armstrong’s wealth, will depend on how Bitcoin performs in the near term.

Earlier this week, Coinbase publicly released the paperwork for its direct listing after filing confidentially with the federal regulators in December. The date of the stock listing is unclear and depends on approval from the Securities and Exchange Commission.

Coinbase would almost certainly become the most valuable publicly listed company in the cryptocurrency industry, and its recent track record is stellar: In its filing, Coinbase said its revenue in 2020 had more than doubled from 2019. It reported profits of $127.5 million last year after a small loss in 2019.

Based on pre-listing private stock sales, the company could be worth anywhere from $50 billion to $100 billion after the listing. Even if the company is valued at the lower end of the range, Armstrong, as one of Coinbase’s largest shareholders, would still earn a spot on the Bloomberg Billionaires Index of the world’s wealthiest people.

Amazon founder Jeff Bezos leads the rankings with a net worth of $180 billion. Tesla CEO Elon Musk is No. 2 with $176 billion.

If Coinbase’s direct listing is a hit, Armstrong could be ranked close to Twitter CEO Jack Dorsey, who is worth $13.4 billion and is at No. 157 on the list. More muted investor appetite would place Armstrong near Hollywood director Steven Spielberg, whose $7.3 billion in net worth ranks him at No. 360.

In late January, Coinbase employees sold shares privately that suggested the company had a valuation of $50 billion. On Feb. 19, Axios reported that more recent private sales valued the company at over $100 billion.

If that sky-high valuation sticks, Coinbase would be the biggest initial stock listing since Facebook, which had a market cap of $104 billion for its market debut.

To be sure, Armstrong’s wealth is theoretical until Coinbase is publicly traded successfully. And despite a banner 2020, the company faces significant challenges.

The bulk of Coinbase’s revenue is from charging customers fees for buying and selling cryptocurrency, such as Bitcoin. Rising prices drive more trading volume, a major factor in the company’s success in 2020.

But the cryptocurrency market is volatile. This is particularly true after major speculative surges, and it already appears that Bitcoin’s latest bull market has run out of steam. On Feb. 21, the cryptocurrency’s value rose above $58,000. But since then, it has cratered to $47,000, a 20% loss in less than a week.

Coinbase acknowledged in its latest regulatory filing that its revenue depends on cryptocurrency prices and transaction volume. It certainly has in the past: A major crypto crash starting in late 2017 reduced Coinbase’s monthly users as much as 70% between early 2018 and early 2019. The extended slump led to layoffs by Coinbase and curtailed the company’s expansion plans as late as April 2019.

If Bitcoin continues its current downward trend, Armstrong’s stock market payday could wind up smaller than expected, as investors look back at history and worry about more turbulence for high-flying Coinbase.