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July 25, 2022

JP Morgan Says Coinbase Shareholders Might Be At Risk

Following the recent exposure of a bitcoin insider trading tipping operation, another piece of unfavorable news may be on the way for Coinbase stockholders.

Coinbase has been in the headlines for all the wrong reasons since the leading exchange revealed that they will be laying off employees. According to JP Morgan’s findings, the corporation could try something different this time around with regard to the employee pay programs it offers.

On Monday, customers of The Wall Street had been advised that stockholders in Coinbase “the danger of increased share dilution coming from restricted stock units.”

According to what was said, the situation is the same with regard to the shareholders of Robinhood. It was noted that the restricted stock units, sometimes known as RSUs, may be included in employee compensation schemes.

A decrease in the price of Coinbase’s shares, as stated by Kenneth Worthington, an analyst at JP Morgan, may lead to an increase in the rate of share dilution by 7 percent per year in the following years.

“Just like their competitors in the technology industry, both of these businesses provide considerable equity to their personnel in the form of restricted stock units (RSUs) as a method of motivating their workers while maintaining lower levels of cash remuneration,”

It is possible that Coinbase will be required to pay its workers by issuing extra shares if this scenario plays out. This might result in a significant reduction in the value of the existing shares.

The analyst from J.P. Morgan noted that the additional shares that were issued and dilution might diminish the value of each firm by thirty percent over the course of five years.

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One month ago, Goldman Sachs lowered its rating on Coinbase and suggested that investors sell their shares of the company’s stock. The recent collapse in crypto market prices was the direct cause of the rating cut.

On Friday, the Securities and Exchange Commission (SEC) said that it had prosecuted three persons, including a former product manager for Coinbase, in connection with the very first cryptocurrency insider trading scam. According to the allegations, the worker disclosed confidential material to his immediate family members and friends before Coinbase made various announcements public.

Ishan Wahi, a worker with Coinbase, participated alongside his brother and a buddy in the process of coordinating important announcements. The commission said in its lawsuit that the plan resulted in an illegal profit of about one million and one hundred thousand dollars.