According to the latest reports, Coinbase’s ongoing legal battle with the U.S. Securities and Exchange Commission (SEC) could lead to the existential threat of the crypto exchange. Over the past few weeks, both parties have stepped up their efforts and gone on the offensive, launching one legal attack after the other. The latest legal action came from Coinbase after it filed a mandamus petition in order to compel the regulator to respond to an earlier petition pending since July 2022.
The impact of the legal battle has extended from the exchange’s offerings to the company’s share price. TD Cowen Analyst Stephen Glagola recently told Bloomberg that, “the business could be materially different than what they are today.” Glogola stated that the company’s stock has been underperforming. According to the analyst, the current trajectory of being in the SEC’s crosshairs may require Coinbase to shutter its entire customer-facing business, which would be an “existential threat” for the firm.
Glagola’s outlook for Coinbase’s share price is shared by several other industry-leading analysts. Earlier this week, Citigroup analyst Peter Christiansen downgraded Coinbase’s stock from a Buy to Hold in light of the “high level of uncertainty” surrounding the crypto exchange on the regulatory front.
Christensen also lowered the company’s share price target from $80 to $65 given the reputational damage from recent lawsuits and threats of enforcement actions. Over the past month, Coinbase’s share price has dropped more than 22%. At the time of writing, the stock was trading at $48.65.
As per Bloomberg’s report, the Wells notice issued by the SEC to Coinbase in March has potentially put the company’s revenue in jeopardy. Analysts at Jefferies Group estimate that almost 35% of the crypto exchange’s net revenue is at risk.
The risk factor will be dictated by the enforcement actions initiated by the securities regulator. As for Coinbase, CEO Brian Armstrong and Chief Legal Officer Paul Grewal have stated that the company is prepared to defend itself vigorously in court if the SEC chooses to litigate.
