Ark Invest Sells Tesla To Buy Coinbase In Its Market Debut

Updated on

Coinbase Global Inc (NASDAQ:COIN) climbed nearly 8% premarket trading this morning, surpassing $350 per share. The cryptocurrency exchange was briefly worth more than $100 billion before the market opened. Coinbase shares closed at $328.28 on their first day of trading on the NASDAQ, which valued it at $85.8 billion.

Get The Full Walter Schloss Series in PDF

Get the entire 10-part series on Walter Schloss in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 2021 hedge fund letters, conferences and more

Coinbase opened on the NASDAQ at $381 and soared as high as $429.54, valuing it at more than $112 billion. Then the bitcoin price fell from record highs while tech stocks declined, and Coinbase shares fell back under the opening price. CNBC links the two activities together, although another expert says the bitcoin price isn't driving Coinbase shares.

Coinbase surges in market debut

The cryptocurrency exchange's debut on the public market is seen as a major milestone for the crypto market. Wall Street firms and the world's regulators have been skeptical of digital currencies for years. Unfortunately for Coinbase, some are worried that the volatility of bitcoin and other cryptocurrencies and regulatory uncertainty could be a headwind for its stock price in the long term.

The company also faces strong competition from other firms in the space, like Gemini, Kraken and Binance. However, Carol Alexander from the University of Sussex Business School told CNBC's Squawk Box Europe today that "the risk management from a regulatory and the operational perspective is much better on Coinbase" than at its competitors.

She explained that the company has a solid revenue stream from its fees and custodial services. Alexander doesn't believe there is any real competitor to Coinbase because she doesn't believe Gemini or Kraken are "the next ones to go."

BTIG analysts gave Coinbase a Buy rating with a price target of $500, which is 50% higher than its closing price on Wednesday. They wrote that they believe the cryptocurrency exchange is the most popular consumer-facing one in the U.S. They also think it is positioned to be a "prime beneficiary of the increased adoption of Bitcoin and other digital assets."

Ark Invest sells Tesla to buy Coinbase

Ark Invest Cathie Wood grabbed up approximately $246 million worth of Coinbase stock in the company's public market debut. This morning's jump in premarket trading could be a reaction to that news. Wood has been a cryptocurrency bull for a long time, and she believes financial advisors could one day recommend them to average investors for their portfolios.

According to Bloomberg, Ark Investment Management bought almost 90,000 Coinbase shares for its Fintech Innovation ETF, more than 500,000 shares for its Innovation ETF, and more than 147,000 shares for its Next Generation Internet ETF. In all, the firm bought almost 750,000 shares of Coinbase.

According to Seeking Alpha, to be able to purchase Coinbase stock, Ark unloaded almost 186,000 shares of Tesla Inc (NASDAQ:TSLA) from one ETF and more than 57,000 shares from another. However, the automaker remains the top holding in those two funds.