Coinbase Again Downgraded By Moody’s For Significant Reduced Revenue In 2022

Key Points:

• Both Coinbase’s long-term credit rating and its guaranteed senior unsecured notes have been lowered by Moody’s due to significantly diminished revenue and cash flow generating capabilities.
• Moody’s also made a note of Coinbase’s recent employment cutbacks; the outlook for the company was categorized as stable.

Moody’s, a major provider of credit ratings, announced on Friday that it had lowered Coinbase’s long-term credit rating as well as the notes’ guaranteed senior unsecured status.

The long-term corporate family rating (CFR) for Coinbase, which measures the possibility of a corporate family defaulting on its obligations, was cut from Ba3 to B2, both of which are regarded as non-investment grades. According to the company, guaranteed senior unsecured notes were downgraded from B1 to Ba2.

The prognosis for the global digital asset exchange has changed from being rated as under review to stable, according to Moody’s.

The protracted crypto winter, according to the rating agency, has negatively impacted Coinbase’s ability to generate revenue and cash flow. The company was downgraded by S&P earlier this month.

“The rating action reflects Coinbase’s substantially weakened revenue and cash flow generation capacity due to the challenging conditions in the crypto asset operating environment characterized by steep declines in crypto asset prices and lower customer trading activity. Moody’s expects the company’s profitability to remain challenged despite its announcement of a reduction in its global workforce of around 950 employees.”

Uncertainty about potential regulatory adjustments in the wake of FTX’s demise is another factor influencing the rating.

“A sudden tightening of regulations and related oversight could have a negative credit impact on Coinbase’s revenues as well as increase its cost base,” said Moody’s.

If restructuring efforts provide dependable profitability and if Coinbase diversifies into long-term non-transactional based income sources, it may receive enhancements to its ratings through improved regulatory clarity that have no influence on the company’s bottom line, according to Moody’s.

Shares of Coinbase fell over 80% in 2022, in part due to the failure of crypto companies, including Three Arrows Capital, Celsius Network, and FTX, as well as a slowdown in trading activity for cryptocurrencies, which remains Coinbase’s primary source of income. The company also stopped operations in Japan due to market conditions.

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Harold

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