The FTX crypto exchange launched Coinbase Pre-IPO (CBSE) tokens this morning as part of its Tokenized Stocks product line, the company said in announcement.
The tickets have seen over $ 2 million traded in recent hours and are currently trading for $ 231.
The tickets were immediately bred by traders seeking to bet on a high valuation of Coinbase’s upcoming IPO.
Launched earlier this year, Tokenized Stocks is an FTX product that tracks popular equity prices – traded on traditional exchanges – and can be purchased through cryptocurrencies. The tickets are supported by the German financial institution, CM-Equity, which in turn holds the actual shares represented by the tokens.
Coinbase is currently priced at $ 8 billion, with its IPO listings seeing rumors of its market cap ranging from $ 40 billion to as much as $ 80 billion. However, while the company itself it has no actual shares on the market again, the Pre-IPO tokens will be a speculative bet that will convert to the corresponding share prices at the end of Coinbase’s first public day (the CBSE will “expire” at that time).
This means that, theoretically, if traders buy $ 10 worth of CBSE today and Coinbase shares trade in public markets at $ 15, they are likely to earn 50% on their initial investment. However, if the shares trade at any value less than $ 10, the traders lose out on their CBSE investment.
In case the IPO does not happen at all, the tickets will expire at Coinbase’s $ 8 billion valuation on June 1, 2022, in line with the offer a document. CBSE balances will end up to $ 32 then, as per the valuation.
CBSE’s highest market capitalization is limited to $ 250 million, FTX said. In addition, the volatility of such tokens is limited to 20%, meaning that CM-Equity, the counterparty of these tokens, may close positions at its discretion.
FTX, meanwhile, considered CBSE tokens as a “high risk” investment and noted that traders face many risks in their purchase – including the possibility of CM-Equity not paying out at the end. “There is a risk that the investment will be partially or completely lost,” said the exchange.