US-based crypto exchange Coinbase is hinting at possibly launching its own token as part of its plan for going public.
In its official filing with the U.S. Securities and Exchange Commission (SEC) to receive approval for an initial public offering (IPO), Coinbase says that part of its capital-raising strategy may include the issuance of its own blockchain tokens in order to support the firm’s financial health as a public company.
“We also expect that being a public company and complying with applicable rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain and maintain the same or similar coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors and qualified executive officers. We might require additional capital to support business growth, and this capital might not be available.”
To generate more capital and help quell debt, Coinbase proposes allowing its board of directors to issue blank check preferred stock in the form of blockchain tokens, as well as making the tokens available to customers on the exchange. Issuing blank check preferred stock is usually used by a company’s biggest shareholders to raise new capital without having to get approval from separate shareholders.
“Furthermore, we have authorized the issuance of ‘blank check’ preferred stock and common stock that our board of directors could use to, among other things, issue shares of our capital stock in the form of blockchain tokens, implement a stockholder rights plan, or issue other shares of preferred stock or common stock. We may issue shares of capital stock, including in the form of blockchain tokens, to our customers in connection with customer reward or loyalty programs. If we issue additional equity securities, including in the form of blockchain tokens, stockholders will experience dilution, and the new equity securities could have rights senior to those of our currently authorized and issued common stock.”
The filing deems the issuance of tokens as a potential risk factor, highlighting that capital flowing into tokens could impact the value of Coinbase’s shares.
“We also may issue our capital stock or securities convertible into our capital stock, including in the form of blockchain tokens, from time to time in connection with a financing, an acquisition, investments, pursuant to customer rewards, loyalty programs, and other incentive plans, or otherwise. Any such issuance could result in substantial dilution to our existing stockholders and cause the public price of our Class A common stock to decline.”
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