Written by Norman Isaac Mwambazi

Week Roundup: Coinbase to invest 10% of its profits in crypto, Spotify stock jumps after announcing share repurchase program

This week has been filled with mostly investment news from China as the country’s regulators tighten regulations against Chinese big …

This week has been filled with mostly investment news from China as the country’s regulators tighten regulations against Chinese big tech companies that have resulted in such companies losing market value worth $1 trillion in the last month. The Taliban takeover of the Afghan government after over 20 years of fighting has also been highlighted this week with investors wondering how that could affect the U.S. stock market.

There has also been a buzz in the crypto-verse as cryptocurrencies like bitcoin, Ethereum, litecoin, and dogecoin among others have grown in price. Notably, Bitcoin has continued to recover from the $30,000 lows of June to closing Thursday, August 19, 2021, at $47,000.

It looks like bitcoin is out of its worst days, and looking to keep growing that it has attracted more mainstream companies to invest in it. One such company is Coinbase (ticker: COIN), which is planning to invest more money in cryptocurrencies, according to its Chief Executive Officer (CEO) and co-founder Brian Armstrong.

On Thursday, August 19, 2021, Armstrong took to Twitter to announce that Coinbase received the approval of its board to invest as much as 10% of its profits in cryptocurrencies, as well as purchasing and adding $500 million in crypto to its balance sheet.

“We recently received board approval to purchase over $500M of crypto on our balance sheet to add to our existing holdings. And we’ll be investing 10% of all profit going forward in crypto. I expect this percentage to keep growing over time as the crypto-economy matures. Hopefully, over time we can operate more of our business in crypto – today it is still a mix, Armstrong tweeted.

After Armstrong’s tweets, Coinbase Chief Financial Officer (CFO) Alesia Haas explained further about them in a blog on the company’s website.

“We believe in the crypto economy, a future where economic transactions – buying, selling, spending, earning – will be based on crypto assets. This means we will become the first publicly-traded company to hold Ethereum, Proof of Stake assets, [decentralized finance] tokens, and many other crypto assets supported for trading on our platform, in addition to bitcoin, on our balance sheet,” Haas wrote.

As of December 30, 2020, Coinbase’s filing to the Securities and Exchange Commission (SEC) showed that the company held $130.1 million in Bitcoin, $48.9 million in stablecoin, $23.8 million of Ether, and $34 million of other digital assets on its balance sheet.

Coinbase could be affected by the recently passed infrastructure bill where some clauses the improvement of tax compliance around cryptocurrencies, through a vague plan to expand the definition of a broker for the Internal Revenue Code of 1986 to include anyone responsible for and regularly providing any service affecting transfers of digital assets is causing the uproar in the crypto space. Crypto investors are worried this could easily extend to almost everyone involved in the crypto business like coin miners, software developers who design and develop apps and platforms where cryptocurrency is traded or stored, crypto startups, hardware manufacturers, and others who don’t custody customer assets.

The company is also preparing for closer scrutiny from the SEC after going public in April this year and is currently trading at $257.32 a share. Coinbase’s shares peaked at $342 on April 16, two days after its debut on the tech-heavy Nasdaq.

Coinbase did not raise money on its IPO debut as normally is the case with other companies. This is because it held a direct listing instead of a standard initial public offering, so it doesn’t have a traditional IPO price against which to measure its debut rally.

Earlier this month, Coinbase released its earnings report of the second quarter of the 2021 fiscal year (Q2 FY2021) where it posted net revenue of $2 billion, a huge growth from its net revenue of $178 million 12 years ago. The company also outperformed itself from the quarter prior to this, where it posted net revenue of $1.6 billion. According to its data, Coinbase surpassed consensus expectations of $1.8 billion in transaction revenue when it posted $1.9 billion in that business segment.

As the largest crypto exchange in the world, Coinbase earns most of its revenue from the trading of the two world’s largest cryptocurrencies in market value Bitcoin and Ether, totalling about 50%. It is only logical to assume that the company was affected when these digital assets plummeted in the past few months but now that they are attempting a comeback, Q3 FY2021 could outperform the previous quarter.

Apart from Coinbase, other publicly traded companies that now include digital assets on their balance sheet include MicroStrategy (ticker: MSTR), +3.24%, Tesla Inc. (ticker: TSLA), and Galaxy Digital Holdings (ticker: GLXY) among others. These three companies hold bitcoin valued at nearly $5 billion, $2 billion, and $800 million respectively.

Spotify’s stock rises after setting $1 billion repurchase program

Week Roundup: Coinbase to invest 10% of its profits in crypto, Spotify stock jumps nearly 2%

Yesterday, Friday, August 20, 2021, digital music streaming service Spotify Technology S.A. (ticker: SPOT) saw its shares jumped 1.7% in premarket trading after the Luxembourg-based company announced plans to buy back its shares worth $1 billion.

Paul Vogel, Spotify’s Chief Financial Officer (CFO) said that the company’s share repurchase program demonstrates their confidence in the company’s business its growth potential, as well as its growth pattern in its 15-year history.

“We believe this is an attractive use of capital, and based on the strength of our balance sheet, we continue to see ample opportunity to invest and grow our business,” Vogel said.

Before this share price rise, Spotify stock had sunk to $203.44 a share in the Thursday trading session, its lowest price since June 17, 2020. Since closing at a record high on Friday, February 19, 2021, Spotify has dropped as much as 43.8% and that is not something the company can be proud of. To put that into context, the benchmark S&P 500 has gained 12.8% since then.

Spotify has a market capitalisation of $41.21 billion and boasts of over 365 million monthly active users as of June 2021.