Crypto VC Paradigm Secures $50 Million Stake In Coinbase

Key Points:

• Crypto VC firm Paradigm buys $50M worth of Coinbase shares amid ongoing battle with the SEC.​
• Paradigm and the entrepreneurs it backs have a strong interest in ensuring that the SEC be held to account for its delay in responding to Coinbase’s rulemaking petition.
• Shares of Coinbase are up around 65% so far in 2023.

The recent share purchase by Paradigm, a crypto venture capital firm and existing Coinbase investor, is a sign of its confidence in the exchange operator.

Paradigm bought additional shares worth about $50 million earlier this week, according to a regulatory filing by co-founder Fred Ehrsam to the U.S. Securities and Exchange Commission on Thursday. Ehrsam, who was also a co-founder of Coinbase from 2012 to 2017 and is a current board director at the company, reported that Paradigm One LP bought 810,000 Coinbase shares on Tuesday and Wednesday at an average price of $61. Today, two Paradigm entities – Paradigm One LP and Paradigm Fund LP – hold a total of 4.5 million Coinbase shares, with Ehrsam owning an additional 1.1 million shares via the Frederick Ernest Ehrsam III Living Trust.

PD’s decision to invest further in Coinbase is timely, given Coinbase’s ongoing legal tussle with the Securities and Exchange Commission. Paradigm filed an amicus brief last month in support of a lawsuit by Coinbase against the SEC, which seeks to compel the SEC to respond to Coinbase’s request for rulemaking for the crypto industry. In its filing, Paradigm said that the delay by the SEC has left the industry in a state of uncertainty, and it is imperative that the SEC be held accountable for its inaction.

Coinbase shares have been on a rollercoaster ride, with a 65% increase in value so far in 2023, according to MarketWatch data. However, the stock has dropped 84% since its high in 2021, which coincided with Bitcoin hitting a record high. Despite the turbulence, Cathie Wood’s Ark Invest has also continued to buy COIN.

Coinbase reported earnings for the first quarter that exceeded analyst expectations. The company reported revenue of $736 million, which is higher than the $658 million estimate of analysts surveyed by FactSet. Its earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $284 million, much better than the negative $36 million that had been estimated. These impressive figures are a sign of Coinbase’s resilience in a highly volatile market, and Paradigm’s investment in Coinbase is a testament to its confidence in the exchange operator’s future prospects.

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