Coinbase shares caught in sell-off after SEC legal warning

• Coinbase (NASDAQ: COIN) share price fell to a low of US$254.56 on Wednesday (08 September 2021)
• The US Securities and Exchange Commission (SEC) has threatened to sue the company over its Lend programme, COIN’s chief legal officer said in a blog post
• Analysts remain optimistic about the stock, with 13 out of 19 brokers calling it a ‘buy’
• Keen to take a chance on Coinbase shares? Open an account with us today.

Coinbase stock price: what’s the latest?

Coinbase shares fell as much as 8.6% this week, after it said the US SEC is planning to sue the company over one of its interest-earning products.

Coinbase’s chief legal officer Paul Grewal said in a blog post that it received an official warning (called a Wells notice) from the SEC last Wednesday about its planned Lend programme.

Grewal said the company was ‘surprised’ by SEC’s ‘threat to sue’, as it has been ‘proactively engaging with the SEC about Lend for nearly six months’.

He added that the company also shared details of Lend with the SEC, the mechanism of the product and why it ‘doesn’t qualify as a security’.

‘After our initial meeting, we answered all of the SEC’s questions in writing and then again in person. But we didn’t get much of a response. The SEC told us they consider Lend to involve a security, but wouldn’t say why or how they’d reached that conclusion. Rather than get discouraged, we chose to continue taking things slowly,’ Grewal wrote.

As a result of what has unfolded, Coinbase has decided not to launch Lend until at least October.

CEO Brian Armstrong has also referred to the move as ‘really sketchy behaviour’ in a 21-part Twitter thread.

But despite the product's very explicit name, Cornell Law School professor Dan Awrey, believes Coinbase ‘isn’t lending here, it’s borrowing’.

‘The idea that borrowing can’t involve the issuance of a security is demonstrably false,’ he said.

COIN share price target analysis

The stock currently has a consensus rating of ‘buy’ and price target of US$362.24, based on the latest analyst data published by MarketBeat.

The price target equates to a potential 40% upside from COIN’s closing price of US$258.20 on Wednesday.

The latest rating came from Needham & Company’s John Todaro, who initiated coverage of Coinbase with a ‘buy’ recommendation and US$420 price target last week.

The analyst wrote that Coinbase is a ‘market-leading crypto asset exchange with significant future opportunities beyond exchange services’. These include staking, custody and yield bearing products.

On the other hand, Mizuho’s Dan Dolev has rated the stock ‘neutral’ with a price target of US$220, which represents a 14.7% downside.

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