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Hayden Capital: Long Thesis on Coinbase (NASDAQ: COIN)

@EQUITYMATES|10 November, 2021

Coinbase is a phenomenal story of the past decade. Started in 2012 to enable people to store, send and receive Bitcoin (remember, Bitcoin was only created in 2009), it has grown to be the largest cryptocurrency exchange in the US (note, not in the world. Binance holds that distinction).

Hayden Capital is a New York based hedge fund that recently published this long thesis for Coinbase. It is a compelling read. The second paragraph of the article really sums up their view on the stock:

We are long the crypto economy and believe Coinbase is in the best position to capture this growth. Trading at ~12.4x estimated 2021 EBITDA, we think the market is placing a discount on the business considering it’s explosive growth over past year (~12x year-on-year), and what we view as continued growth alongside the evolution of the crypto economy. This is also a highly cash generative business with 52% EBITDA margins off revenues of $2.2Bn in Q2’21 (we estimate ~$8.8Bn revenues for full-year 2021), and with a cash balance of ~$4.3Bn (as of Q2 2021).

Across the 73 page thesis, the team at Hayden Capital give a comprehensive overview of the business and the developing crypto ecosystem in general. The company specific stuff is interesting, but this article does a great job in going beyond the price speculation when discussing the crypto ecosystem. There are real technological use cases developing – from remittance in Vietnam to payments in El Salvador – and for us that is the most exciting part of the cryptocurrency story. There is also a discussion of the technologies being built on top of the blockchain – Web3 and NFTs. Venture capital dollars have flooded into the space and Hayden view Coinbase as “a leverage play on the growth of the total crypto market cap”.

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