Coinbase (NASDAQ:COIN) has had a number of potential problems and faced some serious issues lately. These include worker layoffs, a price-target reduction for COIN stock and even a former employee being charged with insider trading.
The days when Coinbase was a darling of the markets seem so long ago now. Some folks may have invested in Coinbase in hopes of huge profits based on cryptocurrency price movements.
Yet, COIN stock isn’t a cryptocurrency. It’s a stock that represents a specific business, and one that’s having problems recently. You’ll want to be aware of these problems before considering a share position in Coinbase. Better yet, you can keep the company’s woes at arm’s length by not investing in Coinbase at all.
What’s Happening With COIN Stock?
It’s hard to be the bearer of bad news. Traders who bought COIN stock at $350 in November of last year, may have to wait a very long time to achieve breakeven. Or, they might never get back to breakeven at all.
What’s frustrating is that the stock will entice investors from time to time with small rallies. Those rallies tend to get sold off, though. That’s why Coinbase shares have stayed below $100 since May.
Again, COIN stock isn’t a cryptocurrency proxy. If you want to buy cryptocurrency, you can choose to do that. Owning shares of Coinbase is another matter entirely. As one Wall Street expert points out, you’d be investing in a company with what seems to be a vanishing market footprint.
Not long ago, Mizuho Securities analyst Dan Dolev lowered his price target on Coinbase shares from $45 to $42. Dolev observed that Coinbase “continues to lose market share in July.” The Mizuho analyst added that Coinbase’s “market share amongst 30 of the largest global exchanges averaged just 2.9% in July, far below the heydays of 2021, and below 1Q’s 5.4%.”
Layoffs, and Alleged Criminal Conduct
Along with Coinbase’s apparently shrinking market share, prospective investors must consider a couple of worrisome developments. First of all, Coinbase reportedly cut 1,100 employees, which would equate to around 18% of the company’s staff. Clearly, that’s not a sign of a growing company.
Second, the U.S. Department of Justice is charging a former Coinbase employee with participating in an insider-trading scheme. Allegedly, a former Coinbase worker tipped his brother and friend regarding cryptocurrency assets that were going to be listed on Coinbase exchanges.
As a business, the last thing Coinbase needs now is for the Justice Department to come after them. Along with the legal ramifications, the reputational damage could linger for a long time.
What You Can Do Now
Investing in cryptocurrency directly is quite different from holding COIN stock. Just look at the recent developments with Coinbase, and you should be convinced that it’s hard to invest in the company with confidence.
Therefore, feel free to buy crypto if that’s what you want to do. You can do that without being exposed to Coinbase’s particular problems, which could become your problems too if you’re an investor.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.