Research Update: Coinbase Outlook Revised To Negative On Earnings Pressure And Expected Lower Excess Cash Position; Ratings Affirmed

After a weak first quarter, we estimate that trading volumes at Coinbase have continued to decline significantly through the second quarter of 2022, reflecting the sharp decline in crypto asset prices. We expect Coinbase to post negative operating cash flows in 2022 but continue to operate with excess cash over S&P adjusted gross debt at the end of 2022, given its strong cash cushion. However, we see rising downside risks to the rating if a prolonged chill in the crypto markets were to extend through 2023 and gradually eat into the company's sizable cash cushion, translating into higher leverage and weaker financial risk. We are revising our outlook to negative from stable and affirming our 'BB+' long-term issuer credit rating

...- After a weak first quarter, we estimate that trading volumes at Coinbase have continued to decline significantly through the second quarter of 2022, reflecting the sharp decline in crypto asset prices. We expect Coinbase to post negative operating cash flows in 2022 but continue to operate with excess cash over S&P adjusted gross debt at the end of 2022, given its strong cash cushion. - However, we see rising downside risks to the rating if a prolonged chill in the crypto markets were to extend through 2023 and gradually eat into the company's sizable cash cushion, translating into higher leverage and weaker financial risk. - We are revising our outlook to negative from stable and affirming our '##+' long-term issuer credit rating on the company. - The negative outlook primarily reflects our view that Coinbase's profitability could remain pressured over the next 12 months from rising uncertainties about crypto asset prices, and the potential duration of a crypto market downturn amid a...

Research Update