Sam Bankman-Fried Estimates Coinbase Is Actually Losing $3B Per Year

Sam Bankman-Fried, CEO of cryptocurrency exchange FTX, believes that Coinbase Global Inc’s COIN actual revenue may be different from what is presented in its earnings report.

What Happened: In a series of tweets, Bankman-Fried said that the cryptocurrency exchange’s “real revenue” from transactions was likely closer to $650 million.

6) You get a revenue of ~$650m, and expenses of...

...well:

a) $150m of marketing
b) $600m of dev payroll
c) $500m of other payroll
d) $100m of 'other'
e) $400m of balance sheet asset price decline

for a total of ~$650m rev, ~$1.4b core expenses, plus $400m impairment.

— SBF (@SBF_FTX) August 9, 2022

“That leads to a loss of roughly $700m, plus another $400m from impairment,” he said.

“My guess is the vast majority of the expenses are coming from payroll/bonuses/etc. here.”

After accounting for stock-based compensation paid to the exchange’s 5,000 plus employees, the FTX chief estimated that Coinbase’s real net revenue was around $2.5 billion, while expenses from employee compensation and other areas were a cumulative $5.5 billion.

7) I *think* this include stock-based-comp.

So, roughly speaking, *annualized*, Q2 would imply:

a) $2.5b of real net revenue (~90% mobile app trading fees)
b) $4.4b of employee comp
c) $1b of other expenses

--> on net, losing roughly $3b/year, including stock based comp

— SBF (@SBF_FTX) August 9, 2022

“It'll be interesting to see the impact of their recent headcount changes on upcoming earnings,” wrote Bankman-Fried, who estimates that the company is losing around $3 billion a year.

He also pointed to macro-sentiment that could potentially swing in Coinbase’s favour in the months to come.

“Remember: Coinbase is more sentiment-dependent than FTX! Large upside in a recovery,” he said.

Coinbase shares fell 10.55% on Tuesday after it reported revenue of $802.6 million, missing the Street estimate of $830.5 million. The stock was trading 5.45% lower after hours.

Meanwhile, the crypto market saw a 3.77% decline to $1.08 trillion over the last 24 hours. At press time, Bitcoin BTC/USD was trading at $22,895, down 3.5% and Ethereum ETH/USD was trading at $1,682, down 4.8% as per data from Benzinga Pro.

Photo courtesy: Cointelegraph on Wikimedia