Coinbase Downgraded By Moody’s Investors Service

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Moody’s Investors Service altered the outlook for Coinbase (COIN) from stable to negative. The reduction was made because of worries about how the Securities and Exchange Commission’s action will affect COIN.

A stock’s rating might potentially go in one of two directions during a medium-term period, usually 12 to 18 months, according to the credit rating agency’s report. The prognosis may be favorable, stable, or unfavorable.

Coinbase Takes Another Hit

The note from yesterday comes as the SEC is suing the exchange again for allegedly acting as an unlicensed broker and dealing in unregistered securities. According to Nasdaq data, COIN was last traded for $54.90. The “uncertain magnitude” of the SEC’s action caused analysts at Moody’s to lower their assessment of COIN.

According to Moody’s, regulatory proceedings against COIN might include “interest and penalties” as well as a significant alteration to its product line and business operations as a result of the application of securities legislation to particular coins and staking services.

In spite of this, Moody’s kept Coinbase’s 2022 credit rating stable, noting the company’s “healthy liquidity position,” cost-cutting measures, and the fact that the SEC’s charges are restricted to a small number of tokens and “exclude its main traded products.” 

The agency’s evaluation of a particular debt issuer’s creditworthiness and default risk is reflected in the credit rating, which is a letter-based grading system. The current credit risk classification assigned to COIN is “corporate family B2, senior debt B1”. 

The primary sources of income for COIN were not addressed in the SEC’s case, according to Moody’s. Since March 2023, trading in ethereum and Bitcoin has contributed 33% of Coinbase’s revenue. In the first quarter of 2023, interest from stablecoins and fiat contributed to 31% of the company’s overall revenue.