SI - Coinbase Global downgraded to Perform at Oppenheimer after Wells notice

2023-03-23 07:57:15 ET

Oppenheimer downgraded Coinbase Global ( NASDAQ: COIN ) to Perform from Outperform after the company received a warning that SEC staff recommended enforcement action against the company for alleged violation of securities laws.

In addition, to the SEC's Wells notice, the recent Economic Report of the President criticized the digital asset industry, Oppenheimer analyst Owen Lau wrote in a note to clients.

A Jefferies note called the Wells notice "an ominous sign" and estimated that an SEC enforcement action against the company can put ~35% of Coinbase's ( COIN ) net revenue at risk. "We believe the notice is a likely precursor to an an enforcement action, which could put revenue from alt. coin trading and staking in jeopardy if required to register with the SEC as securities," the firm said.

Oppenheimer's Lau had raised concerns about blockchain development in the U.S. after the collapse of three banks — Silvergate ( SI ), Silicon Valley Bank, and Signature Bank ( SBNY ). "While we remain highly supportive of blockchain/digital asset development in the U.S., under this unhealthy regulatory climate, we are increasingly worried about the fairness of enforcement actions, and the ability for the ecosystem to grow with seemingly limited and shrinking support from the banking system in the U.S.," the analyst said.

The Presidential report had rebutted several claims about the potential advantages of digital assets and cryptocurrency, saying "crypto assets are mostly speculative investment vehicles" and "generally do not perform all the functions of money as effectively as sovereign money, such as the U.S. dollar."

Lau's Perform rating aligns with the SA Quant rating , the average SA Analyst rating , and the average Wall Street rating , all at Hold.

SA contributor Josh Arnold takes a bullish view on Coinbase due to the prospects for bitcoin.

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