Coinbase Shares Deemed “Uninvestable” in Short Term Due to SEC Lawsuit

Coinbase shares have been deemed “uninvestable” in the short term due to the ongoing lawsuit filed by the Securities and Exchange Commission (SEC), according to a research report by Berenberg Capital. The report notes that the expected decline in second-quarter trading volumes on Coinbase had already been anticipated prior to the lawsuit. However, the legal action has added a layer of uncertainty, which creates an additional burden on the company’s stock.

Uncertainty Intensifies

Berenberg Capital has maintained its hold rating on the stock, but lowered its price target from $55 to $39. The report notes that some investors will likely reduce their exposure to Coinbase in response to the lawsuit and increasing uncertainty surrounding its operations. This makes it a less attractive investment option in the near term. The analyst emphasized that this uncertainty may intensify, potentially leading to continued weakness in the performance of the Coinbase stock, which trades on the Nasdaq exchange under the ticker COIN.

Stock Performance

Coinbase shares traded up just over 3% on Thursday to $54.90, and hence remain well above Berenberg’s price target. On the day of the lawsuit, however, the stock did take a hit, falling about 25% from Monday’s opening price to the open the following day. The report noted that the SEC’s lawsuit against Coinbase could, if successful, result in the complete closure of Coinbase’s core business in the United States. If that were to happen, only Coinbase’s newly launched offshore crypto exchange meant for non-US users would remain. This prospect now weighs heavily on the company’s share price, the Berenberg analyst said.

Conclusion

The ongoing lawsuit filed by the SEC against Coinbase has added a layer of uncertainty, making its shares “uninvestable” in the short term. The report by Berenberg Capital notes that some investors will likely reduce their exposure to Coinbase in response to the lawsuit and increasing uncertainty surrounding its operations. This makes it a less attractive investment option in the near term. The company’s share price could continue to weaken due to the uncertainty, which may intensify if the lawsuit is successful and Coinbase’s core business in the United States is closed.