credit rating agency Moody’s has downgraded its rating on Coinbase from “stable” to “negative” following SEC legal action against the crypto exchange for allegedly operating as an unregistered securities dealer..
In a release June 8, Moody’s said its rating downgrade was due to concerns about the impact of the Securities and Exchange Commission’s action on Coinbase’s day-to-day operations..
“The outlook change to negative reflects the uncertain magnitude of the impact the SEC charges will have on Coinbase’s business model and cash flows.”
Despite the downgrade, Moody’s noted that Coinbase maintains a “strong” liquidity position. The ratings agency looked favorably on the company’s $5 billion in cash and cash equivalents compared with its $3.4 billion in long-term debt.
MOODY’S: COINBASE OUTLOOK TO NEGATIVE FROM STABLE.
— Breaking Market News (@financialjuice) June 8, 2023
MOODY: COINBASE OUTLOOK TURNS FROM STABLE TO NEGATIVE
The firm added that it expects Coinbase to maintain its “spend management focus” that has successfully mitigated declines in transaction revenue in the past..
Moody’s was not alone in adjusting its views on Coinbase. While financial services firm Berenberg Capital reiterated its pre-existing “holding” rating on its clients, it cut its price target for COIN shares from $55 to $39..
In comments emailed to Cointelegraph, Berenberg research analyst Mark Palmer explained that the target price reduction reflects his view that Coinbase could see its already weak second-quarter trading volumes “persist and intensify” as a result of the SEC charges.explaining:
“Given the potentially significant impact of the lawsuit outcome on Coinbase’s US operations, we would expect some investors to reduce their exposure to its platform.”
Besides, Palmer noted that the SEC’s “desired solution” would require the complete winding down of COIN’s core business practices, namely its staking services. Therefore, Palmer advised investors to refrain from investing in Coinbase shares in the short term..
“We consider COIN shares to be non-investable in the short term.”
While Palmer says it’s not a good thing to invest in Coinbase, ARK Invest CEO Cathie Wood doesn’t seem overly concerned. In an interview with Bloomberg, Wood said the increased regulatory scrutiny of competing crypto exchange Binance was ultimately a good thing for Coinbase in the long run..
“They’re very different.”
Ark Invest CEO Cathie Wood says SEC seems to muddle the allegations against Coinbase and Binance pic.twitter.com/icbeIuLs1C
—Bloomberg Markets (@markets) June 8, 2023
“Are very different”.
Cathie Wood, CEO of Ark Invest, says the SEC appears to be confusing the allegations against Coinbase and Binance pic.twitter.com/icbeIuLs1C
At the time of publication of this article, Wood’s ARK Invest is the world’s fourth-largest holder of Coinbase shares and shows no signs of giving up that title any time soon. On June 7, the investment firm bought an additional USD 21.6 million worth of COIN shares..
Coinbase shares have plunged 15.7% since the start of the week, and are currently changing hands at $54.90 a unit.according to data from Google Finance.
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