The Reasons for Today’s Drop In Coinbase Stock

Coinbase Stock

Coinbase Stock (NASDAQ:COIN)

When an analyst lowered his price objective for the company, shares of the cryptocurrency exchange Coinbase Global (NASDAQ:COIN) continued their downward trend today. Since Coinbase disclosed that it has been served with a Wells Notice by the Securities and Exchange Commission (SEC), its stock has been subject to a precipitous decline over the most recent several trading days (SEC).

As of 11:43 a.m. Eastern Time, Coinbase’s stock has dropped by 9.7%.

Then what?

Today, a research analyst at Barclays named Benjamin Budish kept his equal-weight recommendation on Coinbase stock but dropped his price objective for the company’s shares from $86 to $70.

When Coinbase announced the previous week that it had been given a Wells Notice by the SEC, which signals that the business may be violating securities law, investors’ fear over Coinbase increased significantly.

According to a blog post by the business, Coinbase said that the warning is “regarding an unspecified fraction of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet following a cursory inspection.”

Even though there isn’t an official accusation or lawsuit against Coinbase yet, some investors have decided not to wait around to see what happens. The firm’s share price has dropped by around 18% over the previous five days, and today’s price target reduction did not make investors feel any better about the situation.

However, Barclay’s price target reduction isn’t the only one; some analysts have gone even further. This week, Oppenheimer and TD Cowen’s analysts reduced their ratings on Coinbase’s shares. In addition, an analyst from Jefferies named Trevor Williams referred to the Wells Notice as an “ominous portent.”

What’s Next?

Even though it is still unknown how all of this will play out for Coinbase stock, it is evident that investors are becoming more concerned about the possibility of a court battle between the business and the SEC. Although Coinbase has said that it is “confident in the legality of our assets and services,” it would seem that investors do not share this confidence.

Featured Image: Unsplash @ regularguy.eth

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About the author: I'm a financial journalist with more than 3 years of experience. I have worked for different financial companies and covered stocks listed on ASX, NYSE, NASDAQ, etc. I have a degree in marketing from Bahria University Islamabad Campus (BUIC), Pakistan.