Interactive Brokers to offer crypto trading by summer end as analyst initiates Coinbase with Underperform
As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
INTERACTIVE BROKERS TO OFFER CRYPTO TRADING: Interactive Brokers (IBKR) Chairman and CEO Thomas Peterffy said Wednesday at the Piper Sandler Global Exchange and FinTech Conference when asked about cryptocurrency plans that "customers certainly are asking for it, and we expect to be ready to offer it to them by the end of the summer." He added, according to a transcript of the event: "As to hurdles ... how do you keep your customers going to 100% sale. Think about it. How do you make it 100% sure that no one will steal their coins in spite of the fact that they are untraceable? We will find out more about this when we open for business at the end of the summer... We have done some work. It's not a huge amount of work, but we have been working on it for some time now. And as I said, we expect to be done by the end of the summer."
COINBASE INITATED WITH UNDERPERFORM: Raymond James analyst Patrick O'Shaughnessy initiated coverage of Coinbase (COIN) on Tuesday with an Underperform rating. Though Coinbase currently enjoys "substantial momentum as the preeminent trading platform for cryptocurrencies in the U.S." and is an established leader in the space, the vast majority of its revenues come from trading commissions, said O'Shaughnessy. He doesn't see Coinbase having a structural barrier to entry and said that "over and over again history has shown that brokerage and exchanges see excess profits competed away unless there is a structural barrier to entry." He expects significant pricing degradation over time for Coinbase.
Additionally, The Wall Street Journal’s Anne Tergesen reported Thursday that ForUsAll, a 401k provider, announced earlier this month a deal with Coinbase that will allow workers in its plans to invest up to 5% of their 401k into cryptocurrencies. It is not yet known how many of the firm's 400 employer clients have signed up for the cryptocurrency option so far, but this move represents heightened mainstream interest in digital currencies.
IRS CHIEF ASKS FOR AUTHORITY TO REGULATE CRYPTO: Internal Revenue Service commissioner Charles Rettig said the agency needs additional authority from Congress to regulate the cryptocurrency industry and demand more reporting on its users, Bloomberg's Allyson Versprille reported Tuesday, citing the commissioner. "We get challenged frequently and to have a clear dictate from Congress on the authority of us to collect that information is critical," he said, noting the market now tops $2T.
MICROSTRATEGY OFFERS SENIOR NOTES TO BUY BITCOIN: MicroStrategy (MSTR) announced Monday that it intends to offer $400M aggregate principal amount of senior secured notes due 2028 in a private offering to qualified institutional buyers. The notes and the related guarantees will be secured, on a senior secured basis with MicroStrategy's existing and future senior indebtedness, by security interests on substantially all of MicroStrategy's and the guarantors' assets, including any bitcoins or other digital assets acquired on or after the closing of the offering, but excluding MicroStrategy's existing bitcoins as well as bitcoins and digital assets acquired with the proceeds from existing bitcoins. MicroStrategy's existing approximately 92,079 bitcoins will be held by a newly formed subsidiary, MacroStrategy. MicroStrategy intends to use the net proceeds from the sale of the notes to acquire additional bitcoins. The company also announced Monday that based on the fluctuations in market price of bitcoin during Q2, it expects to incur an impairment loss of at least $284.5M related to its bitcoin for the three months ending June 30, 2021.
Following the news, Bloomberg’s Paula Seligson and Alex Wittenberg reported on Tuesday that the company was increasing the size of the bond sale to $500M, according to people familiar with the matter. The company has received about 1.6B in orders for the deal, including interest from a large number of hedge funds.
JPMORGAN UPS TARGET ON SIGNATURE BANK:JPMorgan analyst Steven Alexopoulos raised the firm's price target on Signature Bank (SBNY) to $375 from $350 and kept an Overweight rating on the shares after hosting a "crypto business deep dive" event with CEO Joseph DePaolo. The tone from the meeting was "very bullish on potential growth from the crypto sector as it's still only the bottom of the first inning for growth," Alexopoulos said. With Signature starting to bank the crypto sector in 2018, the bank has been building the expertise and infrastructure required to serve clients in this "underserved niche," said the analyst. He sees the shares as being "significantly undervalued."
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Overstock (OSTK), Ideanomics (IDEX), Riot Blockchain (RIOT), Pareteum (TEUM) and SRAX (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin increased slightly this week to $37,515 in U.S. dollars, according to TradeBlock.