<\/p>\n
Credit ratings agency Moody’s has downgraded its rating of Coinbase from \u201cstable\u201d to \u201cnegative\u201d following the SEC\u2019s legal action against the crypto exchange for allegedly operating as an unregistered securities broker.<\/p>\n
In a June 8 statement, Moody’s said the downgrade was due to concerns about the impact of the SEC action on Coinbase\u2019s day-to-day operations. <\/p>\n
\u201cThe change in outlook to negative from stable reflects the uncertain magnitude of impact the SEC\u2019s charges will have on Coinbase\u2019s business model and cash flows.\u201d<\/p><\/blockquote>\n
Despite the downgrade, Moody’s noted that Coinbase maintains a \u201cstrong\u201d liquidity position. The rating agency looked favorably on the company\u2019s $5 billion in cash and equivalents compared to its $3.4 billion in long-term debt. <\/p>\n
\nMOODY’S: COINBASE OUTLOOK TO NEGATIVE FROM STABLE.<\/p>\n
\u2014 Breaking Market News (@financialjuice) June 8, 2023<\/a><\/p><\/blockquote>\n
The firm added that it expects Coinbase to maintain its \u201cfocus on expense management\u201d that has successfully mitigated declines in transaction revenue in the past. <\/p>\n
Related: <\/em><\/strong>Coinbase CEO\u2019s stock sale was probably not planned to occur a day ahead of SEC suit<\/em><\/strong><\/p>\n
Moodys wasn\u2019t alone in adjusting its outlook on Coinbase. While financial services firm Berenberg Capital reiterated its pre-existing \u201chold\u201d rating to its clients, it slashed its price target for COIN shares from $55 to $39. <\/p>\n
In emailed comments to Cointelegraph, Berenberg research analyst Mark Palmer explained that the reduction in the price target reflects their view that Coinbase could see its already-weak Q2 trading volumes \u201cpersist and intensify\u201d as a result of the SEC\u2019s charges, explaining:<\/p>\n
“Given the potentially significant impact of the lawsuit’s outcome on COIN’s U.S. operations, we would expect some investors to reduce their exposure to its platform.”<\/p><\/blockquote>\n
Additionally, Palmer noted the SEC’s \u201cdesired remedy\u201d would require the complete wind-down of COIN’s core business practices, namely its staking services. As such, Palmer advised that investors should hold off on pursuing any investment in Coinbase shares in the short term.<\/p>\n
\u201cWe view COIN shares as uninvestable in the near term.\u201d<\/p><\/blockquote>\n
While Palmer says Coinbase is uninvestable, ARK Invest CEO Cathie Wood doesn\u2019t seem too worried. In an interview with Bloomberg, Wood said the increasing regulatory scrutiny of competitor crypto exchange Binance was ultimately a good thing for Coinbase in the long run.<\/p>\n
\n\u201cThey’re very different.\u201d<\/p>\n
Ark Invest CEO Cathie Wood says SEC seems to muddle the allegations against Coinbase and Binance https:\/\/t.co\/nCvEp4jdfV pic.twitter.com\/icbeIuLs1C<\/a><\/p>\n