WEBVTT 1 00:00:08.805 --> 00:00:11.875 Hello and welcome to this Vidcast, which is dedicated 2 00:00:11.935 --> 00:00:15.035 to the strategic revival of Coinbase, 3 00:00:15.715 --> 00:00:17.435 a company well known in the crypto 4 00:00:18.035 --> 00:00:21.955 currency industry whose financial model I described three 5 00:00:21.955 --> 00:00:25.235 years ago and which had to invest massively 6 00:00:25.295 --> 00:00:27.235 to ensure its rebound. 7 00:00:28.905 --> 00:00:31.875 What is the situation in May, 2021? 8 00:00:32.175 --> 00:00:34.555 The situation is absolutely excellent 9 00:00:34.575 --> 00:00:36.675 and stratospheric for Coinbase. 10 00:00:37.055 --> 00:00:38.915 The revenues are on the rise. 11 00:00:39.535 --> 00:00:42.515 The operating expenses are declining as a percentage 12 00:00:42.575 --> 00:00:45.555 to revenues, of course growing in absolute terms, 13 00:00:45.895 --> 00:00:48.755 but the company is nicely generating economies of scale. 14 00:00:49.535 --> 00:00:52.915 As a consequence, EBDA is up 15 00:00:53.295 --> 00:00:58.075 and reaches 70% of revenues during the first quarter 16 00:00:58.135 --> 00:01:01.035 of 2021, which is absolutely outstanding. 17 00:01:02.015 --> 00:01:03.995 You remember that EBDA is supposed 18 00:01:03.995 --> 00:01:05.675 to finance capital expenditures. 19 00:01:06.245 --> 00:01:07.595 CapEx is negligible 20 00:01:07.595 --> 00:01:09.995 and then the free cashflow is really very high. 21 00:01:10.815 --> 00:01:13.475 The IPO stock price was 381. 22 00:01:14.145 --> 00:01:16.035 It's down in May, 2020. 23 00:01:16.135 --> 00:01:20.235 Our and because very likely there was some exuberance on the 24 00:01:20.235 --> 00:01:22.795 stock market about cryptocurrencies 25 00:01:22.795 --> 00:01:24.835 and the company was overpaid when it was listed, 26 00:01:25.135 --> 00:01:29.115 but the stock price is stabilizing around 230, 27 00:01:29.255 --> 00:01:30.275 $250. 28 00:01:30.415 --> 00:01:34.715 So absolutely no problem. In May, 2021. 29 00:01:36.185 --> 00:01:39.085 As a matter of fact, the problems are not starting 30 00:01:39.905 --> 00:01:43.525 in mid 2021, it's going to be even better 31 00:01:43.825 --> 00:01:48.365 and in November the stock price is about 350, 32 00:01:48.365 --> 00:01:50.405 which is close to the IPO price, 33 00:01:51.145 --> 00:01:55.725 but then there will be big problems step by step. 34 00:01:56.305 --> 00:02:00.285 At the end of 2021, the stock price is stabilizing back 35 00:02:00.285 --> 00:02:04.245 to 240 around then there will be a first drop 36 00:02:04.345 --> 00:02:07.085 and then there will be a second drop in 2022. 37 00:02:07.575 --> 00:02:10.485 Stock price is going to stabilize around 50, 38 00:02:10.655 --> 00:02:11.805 50 plus dollars. 39 00:02:11.975 --> 00:02:15.525 There will be a low point in January, 2023 at 40 00:02:15.625 --> 00:02:19.685 $33 per share, stabilization, 41 00:02:19.755 --> 00:02:23.205 then a little bit up and then significantly up. 42 00:02:23.265 --> 00:02:25.805 And today's stock prices back to the initial range. 43 00:02:26.305 --> 00:02:30.165 May, 2021 at $240 per share. 44 00:02:30.865 --> 00:02:33.285 And of course you understand that there was a big, 45 00:02:33.585 --> 00:02:35.285 big movement in between. 46 00:02:37.735 --> 00:02:40.785 When the stock price is down, you can observe a number 47 00:02:40.845 --> 00:02:45.145 of speculators, short sellers like Jim Channels trying 48 00:02:45.145 --> 00:02:46.865 to make some profits out of that. 49 00:02:47.715 --> 00:02:49.585 After a short selling 50 00:02:50.145 --> 00:02:53.865 exercise on Beyond Meat in January, 2022, 51 00:02:54.445 --> 00:02:58.265 Jim Channels is going to experience a sargon good job 52 00:02:58.495 --> 00:03:01.165 with a short sale in May, 2022. 53 00:03:02.065 --> 00:03:04.085 At that time, the market capitalization 54 00:03:04.085 --> 00:03:06.165 of the company is still $40 billion, 55 00:03:06.585 --> 00:03:08.765 but the ebit, the operating income is negative 56 00:03:08.825 --> 00:03:10.805 by more than half a billion. 57 00:03:11.665 --> 00:03:14.005 And channel says this is absolutely 58 00:03:14.755 --> 00:03:17.285 overestimated over evaluated company. 59 00:03:17.745 --> 00:03:22.005 So I short sell. You borrow the stocks, you sell the stocks. 60 00:03:22.395 --> 00:03:26.325 Then later on you buy the stocks back at the lower price 61 00:03:26.395 --> 00:03:27.525 hopefully for you, 62 00:03:27.985 --> 00:03:30.365 and you can then bring the stocks back 63 00:03:30.365 --> 00:03:32.565 to the institutional investor from which you borrowed. 64 00:03:32.755 --> 00:03:35.405 Initially when you started the job, 65 00:03:35.745 --> 00:03:37.805 the stock price was 187. 66 00:03:38.305 --> 00:03:40.685 Two months later it was 49. 67 00:03:40.905 --> 00:03:43.205 So he made a lot of money out of that. 68 00:03:43.785 --> 00:03:46.165 But what is quite interesting is to observe 69 00:03:46.165 --> 00:03:49.365 that the percentage of stocks which were shorted in 70 00:03:49.465 --> 00:03:53.605 May, 2022 when it starts is 4.2%. 71 00:03:53.955 --> 00:03:58.085 4.2% means that this percentage of total number of shares 72 00:03:58.665 --> 00:04:00.565 is the subject of short selling. 73 00:04:01.505 --> 00:04:05.325 Now today, the same percentage is 4.7% 74 00:04:05.745 --> 00:04:07.325 and the question is very much raised. 75 00:04:07.625 --> 00:04:09.845 Is the market confident in the evolution 76 00:04:09.865 --> 00:04:12.405 and the bouncing back of Coinbase? 77 00:04:13.555 --> 00:04:15.255 So what happened to Coinbase, 78 00:04:15.305 --> 00:04:19.095 which transformed its life into a nightmare in 2022, 79 00:04:19.595 --> 00:04:20.615 was a kind of recovery. 80 00:04:20.875 --> 00:04:25.735 In 2023, the company is involved in the trading activity. 81 00:04:26.435 --> 00:04:29.175 If you're in trading, your revenues are very much linked 82 00:04:29.175 --> 00:04:30.975 with trading volumes. 83 00:04:31.675 --> 00:04:34.215 The trading volumes are up quarter 84 00:04:34.385 --> 00:04:39.055 after quarter except for quarter three in 2021, 85 00:04:39.935 --> 00:04:42.535 Q4 2021 is a maximum 86 00:04:42.725 --> 00:04:47.175 with more than $600 billion of trading volumes 87 00:04:47.835 --> 00:04:49.175 and then there will be a collapse. 88 00:04:49.755 --> 00:04:54.255 2022 is about collapsing transaction volumes. 89 00:04:54.395 --> 00:04:58.855 Retail almost disappeared institutional last two thirds 90 00:04:59.635 --> 00:05:03.975 and there is a little bit of a recovery at the end of 2023, 91 00:05:04.435 --> 00:05:06.375 but obviously the company is 92 00:05:06.975 --> 00:05:10.375 involved in an industry which is in real difficulties. 93 00:05:11.185 --> 00:05:15.655 There are also in 2022 scandals bankruptcy, 94 00:05:16.335 --> 00:05:19.975 FTX is unfortunately very well known for that. 95 00:05:20.435 --> 00:05:21.735 People went to jail. 96 00:05:21.915 --> 00:05:26.575 So the crypto currency industry is very much suffering in 97 00:05:26.575 --> 00:05:30.945 2022, the revenues are 98 00:05:31.215 --> 00:05:34.305 trading volumes multiplied by fee rates. 99 00:05:35.245 --> 00:05:37.985 The fee rates are quite different for retail 100 00:05:38.245 --> 00:05:39.345 and institutional. 101 00:05:40.325 --> 00:05:43.625 For retail, it's 1.5 plus percent. 102 00:05:43.965 --> 00:05:48.585 For institutional, it's 0.01 or 2%. 103 00:05:49.335 --> 00:05:51.225 What happened in 2022? 104 00:05:51.675 --> 00:05:53.785 There was a slight increase for retail, 105 00:05:54.005 --> 00:05:57.025 but the retail training volumes almost disappeared. 106 00:05:57.755 --> 00:06:00.965 There's a small decline for institutional 107 00:06:01.545 --> 00:06:03.365 and the volume is very much down. 108 00:06:03.425 --> 00:06:06.765 So at the end of the day, the revenues are going to collapse 109 00:06:09.125 --> 00:06:12.225 as a consequence of the collapse in the trading volumes. 110 00:06:12.685 --> 00:06:17.185 2022 is going to be absolutely dramatic for both revenues 111 00:06:17.205 --> 00:06:20.545 and EBDA revenues Q4, 112 00:06:20.545 --> 00:06:22.625 20 21, 2 0.5 billion, 113 00:06:23.235 --> 00:06:26.905 first quarter 20 22, 1 0.2 billion, 114 00:06:27.165 --> 00:06:28.585 so divided by two. 115 00:06:29.095 --> 00:06:33.785 What about E-B-D-A-Q 4, 20 21, 1 0.2, 116 00:06:33.965 --> 00:06:38.305 1.3 billion Q1, 2022, just breakeven 117 00:06:39.085 --> 00:06:43.145 and negative Q2 and then a little bit up quarter 118 00:06:43.435 --> 00:06:46.865 after quarter there will be breakeven for 119 00:06:47.425 --> 00:06:49.305 Q1 2023. 120 00:06:49.885 --> 00:06:51.065 Income is stabilized 121 00:06:51.125 --> 00:06:54.385 and progressively we are back to profitability. 122 00:06:55.345 --> 00:06:59.545 Q4 2023 looks quite okay in terms of income, 123 00:06:59.865 --> 00:07:02.345 revenues and EBDA 124 00:07:04.525 --> 00:07:08.345 in order to bring the company back to growth in the revenues 125 00:07:08.445 --> 00:07:13.385 and positive EBDA, it developed new service activities. 126 00:07:14.085 --> 00:07:16.505 The first one was very much about stable coin 127 00:07:16.605 --> 00:07:18.545 and the interest income, which is linked to that. 128 00:07:19.445 --> 00:07:22.425 You know that cryptocurrencies are quite volatile in 129 00:07:22.425 --> 00:07:23.465 terms of prices. 130 00:07:24.535 --> 00:07:28.145 It's important to bring some stability to the customers. 131 00:07:28.815 --> 00:07:30.665 Then you can share the gates, 132 00:07:30.665 --> 00:07:32.105 which are generated by holding. 133 00:07:32.815 --> 00:07:36.225 so-called stable cryptocurrencies currencies, 134 00:07:36.225 --> 00:07:38.785 which are linked to a strong security, 135 00:07:39.065 --> 00:07:42.225 a strong currency like the US D-A-U-S-D-C 136 00:07:42.365 --> 00:07:43.505 is linked to the us. 137 00:07:43.615 --> 00:07:46.465 Dara are stable in terms of amount. 138 00:07:47.485 --> 00:07:51.425 So basically you hold the stable coin, 139 00:07:51.725 --> 00:07:54.785 you get interest income and you share the gains 140 00:07:55.685 --> 00:07:58.425 and also services about blockchain reward fees. 141 00:07:59.175 --> 00:08:01.385 Your customers are using the platform 142 00:08:01.485 --> 00:08:03.545 for blockchain transactions. 143 00:08:03.655 --> 00:08:08.185 They make a profit. You share the profit cost fee. 144 00:08:08.185 --> 00:08:13.145 Revenue holding cryptocurrencies is reasonably 145 00:08:13.515 --> 00:08:15.665 risky in terms of business operations. 146 00:08:15.765 --> 00:08:18.625 So for the secure holding of the cryptocurrencies 147 00:08:18.625 --> 00:08:20.665 of your customers, you receive fees, 148 00:08:20.885 --> 00:08:22.505 you receive uh, remuneration. 149 00:08:24.305 --> 00:08:27.575 There are other services which are linked with financing. 150 00:08:27.845 --> 00:08:29.615 Financing for the institutions. 151 00:08:30.435 --> 00:08:32.575 You have them financing their trading activity, 152 00:08:33.145 --> 00:08:34.335 their hedging activity, 153 00:08:34.435 --> 00:08:37.055 and also financing their working capital. 154 00:08:38.295 --> 00:08:41.095 A service, which is also about holding cryptocurrencies 155 00:08:41.095 --> 00:08:42.615 about the Coinbase wallet. 156 00:08:43.435 --> 00:08:47.055 The customers that keep the full control of their wallet, 157 00:08:47.675 --> 00:08:49.415 but then they pay less fees, 158 00:08:49.805 --> 00:08:52.575 they receive no operational protection. 159 00:08:53.555 --> 00:08:57.045 You can also help people developing DAPs 160 00:08:57.235 --> 00:08:59.005 decentralized applications. 161 00:08:59.535 --> 00:09:01.125 These applications are supposed 162 00:09:01.185 --> 00:09:05.285 to compete against applications proposed by big players, 163 00:09:06.105 --> 00:09:08.645 but which put you under their old control. 164 00:09:08.915 --> 00:09:12.805 Live peer is supposed to be a competitor for YouTube. 165 00:09:14.075 --> 00:09:17.885 Then all these services are bringing stability 166 00:09:18.105 --> 00:09:21.885 and recurrence in revenues compared to trading. 167 00:09:22.115 --> 00:09:25.285 This is quite obvious which 168 00:09:25.345 --> 00:09:29.565 of these services can be today considered as real commercial 169 00:09:30.075 --> 00:09:32.965 success in terms of revenue generation, 170 00:09:33.985 --> 00:09:38.845 retail trading is still quite high At the end of 2023, 171 00:09:39.045 --> 00:09:43.165 Q4, 2023, the activity represents $500 million. 172 00:09:43.225 --> 00:09:46.885 In terms of revenues, of course is 200 more 173 00:09:47.435 --> 00:09:50.725 than at the end of Q3 2023. 174 00:09:51.345 --> 00:09:53.885 So the retail trading activity is still quite important, 175 00:09:54.185 --> 00:09:57.685 but it's quite volatile with $500 million. 176 00:09:57.875 --> 00:10:00.445 It's about 50% of total revenues. 177 00:10:01.265 --> 00:10:05.445 So you understand that retail trading is not the one 178 00:10:05.465 --> 00:10:06.685 and unique source of revenue. 179 00:10:07.035 --> 00:10:08.525 It's still very high, 180 00:10:08.785 --> 00:10:12.405 but it's sharing revenues with other services. 181 00:10:13.185 --> 00:10:15.685 So surrogate service is about stable coin. 182 00:10:15.685 --> 00:10:19.885 Stable coin marginally started at the end of 2021, 183 00:10:20.515 --> 00:10:23.245 then really grew during 2022 184 00:10:23.245 --> 00:10:26.565 and in today is generating $200 million. 185 00:10:27.145 --> 00:10:31.485 Stable. Retail is not stable. Stablecoin is very stable. 186 00:10:32.145 --> 00:10:34.965 The number three is about blockchain rewards. 187 00:10:35.505 --> 00:10:40.045 It had started in 2021, then it went to 100 million, 188 00:10:40.675 --> 00:10:42.965 went down and is growing again. 189 00:10:43.065 --> 00:10:46.085 The other services are smoothly growing, 190 00:10:46.465 --> 00:10:48.965 but definitely number one is steel retail 191 00:10:48.965 --> 00:10:50.525 trading with volatility. 192 00:10:51.225 --> 00:10:53.245 Number two in three are stable coin 193 00:10:53.625 --> 00:10:56.285 and blockchain rewards with stability. 194 00:10:58.815 --> 00:11:02.355 Now of course the question was these are developments, 195 00:11:02.495 --> 00:11:06.595 but in order to develop new services, new activities 196 00:11:07.135 --> 00:11:08.875 you need to invest. 197 00:11:11.205 --> 00:11:14.025 Of course a number of investments is this kind of business 198 00:11:14.735 --> 00:11:16.865 show in the p and l in the cost. 199 00:11:17.155 --> 00:11:19.225 There are some cost items which are 200 00:11:19.625 --> 00:11:21.185 absolutely pure investments. 201 00:11:21.185 --> 00:11:22.985 This is a case of research and development. 202 00:11:23.945 --> 00:11:27.825 Research and development expenses in 2022 are 1 billion more 203 00:11:27.895 --> 00:11:30.465 than 2021 from 1.3 204 00:11:30.845 --> 00:11:34.065 to 2.3 billion in 2023. 205 00:11:34.085 --> 00:11:36.665 The figure is down to 1.3, 206 00:11:37.165 --> 00:11:39.785 but the company is very much investing in order 207 00:11:39.805 --> 00:11:41.985 to manage a kind of rebound. 208 00:11:43.005 --> 00:11:44.625 In the same time the company has 209 00:11:44.625 --> 00:11:46.585 to invest in it and support. 210 00:11:46.585 --> 00:11:48.945 This is why general and admin is going to increase 211 00:11:49.455 --> 00:11:51.985 also significantly in 2022. 212 00:11:52.885 --> 00:11:55.205 Now when you have to invest, you have to cash out, 213 00:11:55.745 --> 00:11:57.125 but you understand that in r 214 00:11:57.125 --> 00:11:58.965 and d it's about wages and salaries. 215 00:11:58.965 --> 00:12:02.165 So if you want to demonstrate to people 216 00:12:02.165 --> 00:12:04.445 that you are very much confident in the future 217 00:12:04.745 --> 00:12:08.725 and these people trust you, you can also pay wages 218 00:12:08.745 --> 00:12:11.325 and salaries in stock-based compensation. 219 00:12:11.325 --> 00:12:15.485 This is why in 2022, SBC is going to be up 220 00:12:15.545 --> 00:12:17.725 by $700 million, 221 00:12:18.415 --> 00:12:22.365 which is a very significant part of the r and d increase 222 00:12:22.905 --> 00:12:24.725 and general and admin of course. 223 00:12:25.385 --> 00:12:27.245 So it's going to be an investment. 224 00:12:27.635 --> 00:12:30.965 It's an increase in your cost, but it's no cash out 225 00:12:31.145 --> 00:12:34.205 or I would say it limits the cash outflow. 226 00:12:36.385 --> 00:12:39.125 Now as a consequence of all these investments, what happened 227 00:12:39.125 --> 00:12:40.885 to the net cash position of the company? 228 00:12:42.065 --> 00:12:45.285 The EBITDA was positive before 2022. 229 00:12:45.685 --> 00:12:47.325 Strongly positive in 2021. 230 00:12:48.225 --> 00:12:52.325 In 2022, the EBITDA adjusted for stock-based compensation. 231 00:12:52.425 --> 00:12:56.165 So excluding this non-cash item is negative by 1 billion. 232 00:12:56.305 --> 00:12:58.845 So it's 1 billion of cash consumption. 233 00:12:59.825 --> 00:13:02.365 The net cash position of the company is made of cash 234 00:13:02.895 --> 00:13:04.645 minus less long-term debt. 235 00:13:04.645 --> 00:13:07.045 There is no short-term interest bearing debt 236 00:13:07.665 --> 00:13:09.205 in the balance sheet of Coinbase. 237 00:13:09.715 --> 00:13:11.365 Long term debt is stable 238 00:13:11.365 --> 00:13:14.325 because it's really long term $3.4 billion 239 00:13:14.785 --> 00:13:19.765 and the cash situation was 7.1 positive in 2021 240 00:13:20.025 --> 00:13:22.005 and it's 4.4 in 2022. 241 00:13:23.105 --> 00:13:27.485 The 2.7 billion reduction in net cash position from 242 00:13:27.485 --> 00:13:31.525 21 to 22 is explained partly by the ebitda, 243 00:13:31.525 --> 00:13:33.045 which is negative by 1 billion, 244 00:13:33.545 --> 00:13:34.565 but also by the fact 245 00:13:34.565 --> 00:13:36.685 that there will be some restructuration expenses 246 00:13:37.265 --> 00:13:40.565 and you have to invest some working capital in the 247 00:13:40.565 --> 00:13:42.165 development of the new businesses. 248 00:13:43.075 --> 00:13:47.205 When a net cash position is positive by $3.7 billion, 249 00:13:47.555 --> 00:13:49.845 your situation is extremely comfortable 250 00:13:49.905 --> 00:13:52.685 and safe when it's still positive, 251 00:13:52.705 --> 00:13:55.325 but by only $1 billion. 252 00:13:55.905 --> 00:13:58.965 You understand that the situation is another story. 253 00:13:59.675 --> 00:14:02.885 Obviously it's going to improve in 2023, 254 00:14:03.505 --> 00:14:06.925 but at the end of 2022, the company is, 255 00:14:06.985 --> 00:14:09.965 is in a situation which is not yet back 256 00:14:09.985 --> 00:14:11.925 to normal operations. 257 00:14:15.215 --> 00:14:18.465 Then what we have observed is a very traditional situation 258 00:14:18.465 --> 00:14:20.945 of a company which wants to go back 259 00:14:20.965 --> 00:14:22.905 to growth in terms of revenues. 260 00:14:23.725 --> 00:14:25.905 If you want to grow, you have to invest 261 00:14:26.205 --> 00:14:28.785 to invest in the transformation of the company 262 00:14:29.245 --> 00:14:31.705 and to invest a working capital, which you need 263 00:14:31.705 --> 00:14:33.185 to develop your revenues. 264 00:14:33.845 --> 00:14:37.185 You grow, you invest, you consume financial resources, 265 00:14:37.455 --> 00:14:40.825 then you consume cash, then you need cash. 266 00:14:42.995 --> 00:14:45.695 Before we get back to the cash position 267 00:14:46.035 --> 00:14:49.415 and the cash needs of the company, let's go back 268 00:14:49.415 --> 00:14:51.845 to stock price and stock market. 269 00:14:53.025 --> 00:14:55.125 If you look at the evolutionary stock price 270 00:14:55.665 --> 00:14:59.245 of Coinbase from its IPO, it's down 271 00:14:59.345 --> 00:15:00.725 by 30%, 272 00:15:01.665 --> 00:15:04.125 but a few quarters ago it was down 273 00:15:04.145 --> 00:15:09.005 by 100% almost though the company is really bouncing back. 274 00:15:09.505 --> 00:15:13.605 In the meantime, the NASDAQ was uh, by 15%. 275 00:15:14.385 --> 00:15:16.365 It went down and it went up. 276 00:15:16.755 --> 00:15:19.885 When you look at the correlation between Coinbase 277 00:15:20.105 --> 00:15:23.965 and the nasdaq, you can calculate econometrically, 278 00:15:23.995 --> 00:15:26.445 calculate the beta, which is a sensitivity 279 00:15:26.625 --> 00:15:28.845 of your stock price to the evolution 280 00:15:28.845 --> 00:15:30.045 of the stock market index. 281 00:15:30.505 --> 00:15:32.885 The beta is 3.37, 282 00:15:33.295 --> 00:15:36.285 which is an extremely high coefficient 283 00:15:37.225 --> 00:15:41.165 and it's quite obvious that there is a kind of correlation. 284 00:15:41.225 --> 00:15:45.965 Of course, econometrically, Coinbase is amplifying, 285 00:15:46.195 --> 00:15:50.005 very much amplifying the volatility of the nasdaq, 286 00:15:50.465 --> 00:15:52.765 but it seems a little bit curious, this kind 287 00:15:52.765 --> 00:15:53.925 of high volatility. 288 00:15:54.385 --> 00:15:57.805 Is there any other factor for correlation? 289 00:15:58.955 --> 00:16:02.295 The answer is yes. There is a much stronger correlation 290 00:16:03.245 --> 00:16:05.535 with the market price of a Bitcoin 291 00:16:05.955 --> 00:16:07.815 and other cryptocurrencies. 292 00:16:08.475 --> 00:16:12.535 The company was almost 100% in the trading activity. 293 00:16:13.355 --> 00:16:16.215 The trading volumes are very much correlated 294 00:16:16.365 --> 00:16:18.255 with the evolution of the price. 295 00:16:18.875 --> 00:16:21.295 So basically there is volume 296 00:16:21.885 --> 00:16:24.335 when there are price movements. 297 00:16:25.045 --> 00:16:28.215 This is why the Coinbase stock price in the early days 298 00:16:28.465 --> 00:16:31.655 after its listing was absolutely correlated 299 00:16:31.655 --> 00:16:34.335 with the evolution of the market price 300 00:16:34.515 --> 00:16:35.815 of the cryptocurrency. 301 00:16:36.285 --> 00:16:39.695 There's a kind of decoration which starts in 2022, 302 00:16:40.195 --> 00:16:42.415 but the correlation is still quite strong. 303 00:16:42.795 --> 00:16:47.255 Why? Because Q4 2023, the revenues 304 00:16:47.355 --> 00:16:51.095 of the care generated by the company are made 50% 305 00:16:51.595 --> 00:16:53.855 by trading, retail trading. 306 00:16:54.635 --> 00:16:57.935 So as the company has increased the share 307 00:16:57.935 --> 00:17:00.975 of the revenues generated by services 308 00:17:01.075 --> 00:17:02.535 and now it's 50%, 309 00:17:02.535 --> 00:17:05.255 which is quite outstanding in a short period of time. 310 00:17:05.835 --> 00:17:09.495 But still the other 50% is very much about trading, 311 00:17:09.995 --> 00:17:12.815 and trading is very much about sensitivity. 312 00:17:13.235 --> 00:17:14.495 So the risk is less, 313 00:17:14.635 --> 00:17:17.255 but there is still a quite high level of risk 314 00:17:19.075 --> 00:17:21.575 as a company has consumed quite a lot of cash 315 00:17:21.765 --> 00:17:23.855 because of negative EBDA. 316 00:17:23.855 --> 00:17:25.015 Because of investment, 317 00:17:26.095 --> 00:17:27.575 'cause of its own working capital, 318 00:17:27.575 --> 00:17:30.815 which is involved in the new activities, it has to 319 00:17:31.615 --> 00:17:33.855 reinforce its working capital again 320 00:17:34.205 --> 00:17:36.015 because it's still quite risky. 321 00:17:36.205 --> 00:17:38.895 Even though the service activities much more stable 322 00:17:38.895 --> 00:17:40.135 than the trading activity. 323 00:17:41.135 --> 00:17:44.255 A few weeks ago in March, 2024, the camp, 324 00:17:44.395 --> 00:17:47.095 he announced a very timely additional funding. 325 00:17:47.795 --> 00:17:49.365 The stoke price is up. 326 00:17:49.435 --> 00:17:52.085 This is a right moment to issue a kind 327 00:17:52.085 --> 00:17:54.605 of equity linked hybrid instrument, 328 00:17:54.615 --> 00:17:56.085 which is a convertible bond. 329 00:17:56.745 --> 00:17:59.765 The amount which is going to be raised is $1.1 billion 330 00:18:00.445 --> 00:18:02.045 maturity 2030. 331 00:18:02.305 --> 00:18:04.325 So you have six euros in front of you. 332 00:18:04.625 --> 00:18:07.405 The cool point is going to be zero point 25%, 333 00:18:07.915 --> 00:18:10.645 much less than the long-term governed bond rate. 334 00:18:11.265 --> 00:18:14.325 But obviously in a convertible bond there is a call option 335 00:18:14.325 --> 00:18:16.165 which is embedded in the bond, 336 00:18:16.705 --> 00:18:19.605 and you have the right to convert your convertible bond at 337 00:18:19.885 --> 00:18:22.405 maturity and get three shares out of one bond. 338 00:18:22.985 --> 00:18:25.605 The nominal of a bond is $1,000. 339 00:18:26.025 --> 00:18:30.005 So you are going to convert if the stock price exceeds one 340 00:18:30.005 --> 00:18:32.805 third of that, which is 300 is $3. 341 00:18:33.745 --> 00:18:37.725 The stock price when the bond is announced is 252. 342 00:18:38.305 --> 00:18:42.525 So there must be an upside of 252 up 343 00:18:42.545 --> 00:18:46.045 to 333 to justify the conversion. 344 00:18:47.475 --> 00:18:51.325 What is going to be the usage of the funds? 345 00:18:51.745 --> 00:18:53.325 Senior debt repayment 346 00:18:53.825 --> 00:18:57.205 and partial repayment of a convertible which had been issued 347 00:18:57.905 --> 00:19:02.605 in May, 2021 when the stock price was in a 348 00:19:02.765 --> 00:19:07.445 range 230, 250, quite the same range as today, 349 00:19:08.105 --> 00:19:11.045 but at that time the conversion rate was more aggressive, 350 00:19:11.275 --> 00:19:14.165 only 2.7 shares for one bond, 351 00:19:14.945 --> 00:19:18.365 and then the conversion was exercise by the investors. 352 00:19:18.545 --> 00:19:20.485 The stock price was at least 353 00:19:20.485 --> 00:19:24.245 $370 per share. 354 00:19:24.465 --> 00:19:28.805 So it's less aggressive today, but it's quite opportunistic 355 00:19:28.865 --> 00:19:32.325 and this opportunism is very consistent 356 00:19:32.355 --> 00:19:33.845 with the financial theory, 357 00:19:34.415 --> 00:19:37.445 which says when the stock price is up, hesitate 358 00:19:37.445 --> 00:19:39.245 to mobilize the investors. 359 00:19:42.325 --> 00:19:43.905 Let me conclude this with cast 360 00:19:43.905 --> 00:19:46.385 with a few words on financial strategy. 361 00:19:47.425 --> 00:19:50.985 Coinbase experienced very strategic challenges, 362 00:19:52.015 --> 00:19:54.025 huge difficulties in 2022. 363 00:19:54.405 --> 00:19:58.345 The business is evaporating when a company is 364 00:19:58.345 --> 00:19:59.545 in front of difficulties. 365 00:19:59.695 --> 00:20:03.945 General speaking, what does it do? Reduce cost, save cash. 366 00:20:04.765 --> 00:20:06.545 And this is obviously what you have to do. 367 00:20:06.545 --> 00:20:08.705 You have to restructure your business operations, 368 00:20:08.735 --> 00:20:10.145 save cash and so on and so forth. 369 00:20:10.205 --> 00:20:12.625 But if you do that and only that, you are going 370 00:20:12.625 --> 00:20:13.665 to die healthy. 371 00:20:14.485 --> 00:20:17.065 If you want to build a future, you need to do 372 00:20:17.145 --> 00:20:18.865 what is name investing. 373 00:20:19.365 --> 00:20:22.505 So you reduce cost, you save cash and you invest. 374 00:20:23.045 --> 00:20:26.425 But investment is consuming cash by itself. 375 00:20:27.045 --> 00:20:29.625 So if you want to be able to invest, you need cash. 376 00:20:29.815 --> 00:20:33.785 Cash available. And cash available means prudent. 377 00:20:34.095 --> 00:20:38.025 Finance, very conservative financial strategy. 378 00:20:38.885 --> 00:20:43.065 And so of course the cryptocurrency industry is not exactly 379 00:20:43.135 --> 00:20:45.345 what I would name a normal industry. 380 00:20:45.415 --> 00:20:48.645 It's very new, it's very volatile and so on and so forth. 381 00:20:48.665 --> 00:20:51.845 But what is very interesting to observe is that in this 382 00:20:52.375 --> 00:20:54.965 quite strange industry, Coinbase, 383 00:20:55.315 --> 00:20:59.485 he's a very normal company with absolutely normal 384 00:21:00.325 --> 00:21:02.525 behavior, conservative finance 385 00:21:03.345 --> 00:21:05.885 for risk taking in business operations. 386 00:21:06.785 --> 00:21:07.575 Thank you very much.