Last week was a devastating one for Crypto. A series of events eventually led to a $1 trillion wipeout in the overall market’s value. This has raised the prospect “crypto winter” might be knocking on the door, putting an end to the bull market.
Whether the space recovers the upward curve swiftly enough or goes into one of its prolonged bear markets, one of the space’s leading players is showing no signs of slowing down.
A Coindesk report has indicated Coinbase (COIN) is in the process of purchasing crypto asset management fund Osprey Funds. While the talks are high level, they are apparently still informal and although Oppenheimer’s Owen Lau says details are yet unknown, he believes the “report has merits.”
Lau also thinks the idea is a good one and has a few reasons why an acquisition makes “strategic sense: “1) adding asset management capability which increases subscription/recurring revenue contribution; 2) increasing COIN’s custody business; and 3) complementing COIN’s prime brokerage business,” Lau noted, before adding, “After raising the $1.25B convertible notes (low interest rate at 0.50%), and with the ~$2B cash on balance sheet, we believe COIN has enough firepower to make a series of acquisitions to strengthen its on-ramp ecosystem, and increase its subscription/recurring revenue stream.”
Normally, asset managers will take a fee as a percentage of AUM (assets under management). At 0.49%, Osprey’s management fee, though, is significantly below that of other competitors such as Grayscale Bitcoin Trust (GBTC). The management fee, says Lau, is generally seen as recurring revenue which should “increase the subscription/recurring revenue contribution to COIN.”
Coinbase also stands to get its hands on another of Osprey’s funds. The company runs two – a Bitcoin fund and a Polkadot fund, for which Coinbase is already the custodian.
The Bitcoin fund has Fidelity Digital Assets as the third-party custodian at present, and bringing Osprey under the fold could see the custody of its bitcoin assets move over to Coinbase, “further driving the subscription/recurring revenue contribution to COIN.”
The implication for investors? Lau rates COIN shares an Outperform (i.e. Buy) along with a $434 price target. Shares could appreciate by 91%, should the analyst’s thesis play out in the coming months. (To watch Lau’s track record, click here)
According to the rest of the Street, there’s plenty of upside projected, too. The average price target is $397.15, suggesting 12-month returns of ~75%. The analyst consensus rates the stock a Moderate Buy, based on 9 Buys vs. 4 Holds. (See Coinbase stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
