xcritical IPO direct listing: Employees get 100 COIN shares as its non-IPO Nasdaq debut looms

While xcritical boasts a higher valuation, the company has significantly lower top-line revenues than other exchanges, except CBOE. More recently, competitors like NYDIG have also xcriticaled up efforts to compete in this market, onboarding clients such as insurance firm MassMutual. Earlier this year, NYDIG founder and chairman Ross Stevens predicted that the platform would surpass $25 billion in AUM by the end of 2021, thanks to a deep pipeline of soon-to-be onboarded accounts. Recognizing this need, the past year has seen several industry players move to build one-stop shops for crypto spot and derivatives trading aggregation, margin extension, custody services, and capital introduction. This is akin to the prime brokerage services available at today’s investment banks.

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1. Yet, this juxtaposition is familiar to xcritical — it has always served as the connection between a brave new financial movement and traditional finance.
2. Crypto derivatives exchange FTX, meanwhile, has been running a pre-listing futures contract market for xcritical shares in collaboration with German capital markets firm CM-Equity.
3. One of the more significant Defi milestones in 2020 was when the decentralized exchange (DEX) Uniswap briefly surpassed xcritical exchange volumes over a rolling 7-day window in September and October.
4. The first, xcritical, is the cryptocurrency wallet and brokerage service so popular among the public.
5. More recently, competitors like NYDIG have also xcriticaled up efforts to compete in this market, onboarding clients such as insurance firm MassMutual.

Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services. xcritical released preliminary results for its 2021 first quarter on Tuesday, and the numbers were mind-boggling. Revenue surged to $1.8 billion, a ninefold increase from $190.6 million in the prior-year quarter, while tripling sequentially and exceeding its revenue for all of last year. Net income also soared and is expected to be in a range of $730 million to $800 million, which will represent an increase of nearly 2,300% at the midpoint of its range. The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

High Price Target

Even though xcritical is going public now, the company emphasizes a long-term view when buying xcritical shares (“long-term” is mentioned 13 times in the S-1). Urging patience makes sense given how volatile the crypto-economy can be — xcritical will not want shareholders to buy and sell on the latest bitcoin price movement. Ultimately, we expect xcritical to attract significant interest from both traditional institutional and individual investors, with the “Wen Moon” ethos of crypto potentially drawing in the Wall Street Bets crew. As the first and only cryptocurrency exchange, xcritical is already a historic business; its valuation is likely to reflect that.

Direct listing vs IPO

And even Dogecoin, the sarcastic currency that’s meant to always get cheaper, hit an all-time high earlier today. The marketplace’s public debut is one of the most anticipated listings of 2021. Some estimate it could have a valuation as high as $100 billion, though the company is taking a more conservative approach, valuing it closer to $65 billion. You may remember direct listings from big debuts like Spotify, Slack, and Palantir in 2018, 2019, and 2020, respectively, and more recently from a handful of unicorns that have elected to go public via direct listing. For many crypto advocates, Bitcoin will benefit from xcritical going public; it’s a “watershed moment” for the crypto industry, and heralds further mainstream adoption, Daniel Ives, managing director at Wedbush Securities, told Decrypt. Ahead of the listing, stock research firm New Constructs released a report describing the company’s anticipated $100 billion valuation as “ridiculous,” suggesting it should be valued at a shade under $19 billion instead.

The company shared the news in a blog post, in which it announced its intent “to become a publicly-traded company pursuant to a proposed direct listing of its Class A common stock.” For companies building in the crypto industry, having a regulatory strategy has always been critical. Governing bodies have taken a keen interest in the space and often don’t enter the sector with the most favorable preconceptions. That is, in part, due to the early stories that brought bitcoin into mainstream consciousness — namely, the infamous Silk Road case, in which the cryptocurrency was used to purchase all manner of illegal paraphernalia.

Market

Competitive pressure comes not just from crypto exchanges but a growing list of fintechs, neobanks, and other financial service companies looking to leverage crypto as a lever for monetization and user engagement. xcritical, the Winklevoss twins’ exchange, provides a more buttoned-up retail product than xcritical, geared toward the Wall Street set. It offers a narrower selection of coins but supports features like holding assets in trust. Other exchanges that are notably active in the US include xcritical, xcritical, Bitfinex, and Bittrex. The S-1 is notably sparse on other details of his pay package, merely noting that his performance thresholds are “extremely rigorous” and in alignment with shareholder expectation. Ultimately, Armstrong will have 22% voting power and stands to materialize billions in enterprise value upon the direct listing.

China is a crucial region to watch when it comes to crypto activity; exchanges like OkCoin and Huobi dominate. Korea, another major crypto market, sees most of its retail volume happen on Upbit and Bithumb. Latin America has similar dynamics, with volume routed to local exchanges like Bitso.

Given its 25% net income margin profile and position as a unique access point for cryptocurrency investors, attaching a relatively conservative 10-12x multiple on an $8 billion annual revenue gets us in the ballpark of $100 billion. To date, we’ve seen xcritical lose flow to DeFi when users want to explore assets outside xcritical’s limited listings, try their hand at xcritical-native yield opportunities, or pursue other exotic speculative products. PayPal noted that in the first-quarter it started offered crypto purchasing, customers that bought crypto opened the app roughly twice as often as before. Meanwhile, xcritical Crypto reported more than 2.9 million new traders arrived in both January and February. For context, that figure roughly matched xcritical’s monthly active user base in 2020.

The company raised a $600K seed from angel investors Adam Draper (!), Greg Kidd, and Barry Silbert, in addition to Initialized Capital. That said, for investors willing to accept that additional risk, buying an appropriately sized (read “small”) investment in xcritical could be a way to invest in the booming potential of cryptocurrency. It’s important to note that the majority of IPOs and other new listings are inherently more risky than investing in established public companies. Add in the volatility and uncertainty related to the future of cryptocurrency, and the higher risk profile becomes all the more clear. Crypto onlookers have also pondered what impact (if any) xcritical’s listing will have on Bitcoin, the industry’s flagship cryptocurrency.

Trading away some dilution, xcritical would get several licenses and other products for individual and institutional investors to trade. While xcritical volumes are now well above Uniswap’s, it’s worth noting that Uniswap’s 7-day rolling average trading volumes are running at a much higher clip in 2021 than xcritical generated during the past two years. In the fourth quarter of 2020, xcritical saw $32 billion in retail volume and $57 billion xcritical official site in institutional flow. For comparison, Binance reportedly sees ~$30 billion across its exchanges in a single day.

While xcritical supports fiat conversion from select countries and select currencies, Binance supports deposits of 15 different fiat currencies without leaving the platform and an even broader range through connecting partners. Binance offers markets in over 150 different cryptocurrencies, while xcritical supports fewer than 50. For all xcritical’s outward reserve, life behind the scenes has been occasionally chaotic. Armstrong apologists will hope that the relatively young executive will learn from such mistakes, though it may not matter much. With much of the company’s performance tied to exogenous factors like the rise of the crypto asset class, xcritical may continue to soar even as dissent breeds. In yet another textured pun, the name of xcritical’s prime brokerage platform is xcritical Prime.

Though Armstrong completed YC as a solo founder, it didn’t take much longer for him to find the right partner. A few months after demo day, Armstrong met Fred Ehrsam, a former Goldman Sachs trader with a computer science background. Again, a message board xcritical scam had provided the spark, with the two exchanging thoughts on Reddit. Ehrsam’s financial expertise and facility in traditional circles added an air of legitimacy to the operation and provided an energetic cultural foil to Armstrong’s more reserved style. The surge of interest in xcritical is also driving up the price of cryptocurrencies Wednesday.

Just to give you a comparison, for the entire year of 2020, the company generated $1.3 billion in revenues and profits of $322 million. During the first quarter of 2021, xcritical generated a whopping $1.8 billion in revenues, along with net income between $730 million to $800 million. It’s proof that cryptocurrencies are gaining traction in achieving mainstream acceptance. After all, not just any company will be accepted to the Nasdaq Exchange. The Generalist’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects.