Written by: Xiao Bing

On September 21, Coinbase announced that eligible U.S. users can directly apply for IPO allocations within the App. The first offering is from the smart ring company Oura, where users can apply to purchase shares at the issuance price before the stock starts trading.

This is the latest step in Coinbase's "Everything Exchange" strategy.

In the past 12 months, this cryptocurrency exchange has launched stock and ETF trading, options trading, Pre-IPO derivatives, and submitted a registration notice to the SEC for equity perpetual contracts. Now, it has reached into Wall Street's most closed-off territory: primary IPO allocations.

The price of COIN hit a four-month high that day.

Oura IPO, What Role Does Coinbase Play?

First, let's clarify a key detail: Coinbase's role in this transaction is that of a "selling group member," not an underwriter.

The Oura IPO is co-led by Goldman Sachs and Morgan Stanley. Robinhood Securities is participating as an underwriter for the first time in this transaction. Coinbase distributes a portion of the shares in an agency capacity through its subsidiary Coinbase Capital Markets (FINRA registered broker), without assuming underwriting risk, holding inventory, or participating in pricing.

These two roles differ significantly. Underwriters participate in roadshows, pricing, and allocation decisions, bearing the risk of unsold shares and receive higher fees. A selling group member is only responsible for selling the allocated shares to its clients, earning a sales commission (typically 1% to 2% of the allocation amount).

Oura plans to issue 50 million shares, with a price range of $40 to $44, raising approximately $2.1 billion to $2.2 billion, giving it a valuation of around $14 billion to $15.6 billion. Of this, 73% consists of shares sold by existing shareholders (365,000 shares), and 27% are newly issued by the company (135,000 shares), with cornerstone investors Eli Lilly and Dragoneer subscribing for approximately $400 million (19% of the offering size).

How many shares can Coinbase allocate? This has not been publicly disclosed. However, as a selling group member, it typically receives only a very small portion of the total shares issued.

How Does It Work for Users?

Users open a new "IPOs" page in the Coinbase App, select active IPO projects, load their accounts to cover the application amount, and then submit a "conditional purchase offer."

Application does not guarantee allocation. The final allocation depends on the total amount of shares provided by the underwriters and total customer demand, which could result in full allocation, partial allocation, or no allocation. During the subscription window, users can modify or cancel their applications. If the issuance price changes beyond a certain range, resubmission is required.

Once the allocation is completed, the stock can be traded on Coinbase as soon as public trading begins.

Coinbase has set up a mechanism against "IPO arbitrage": if a user sells IPO shares within 30 days of allocation, they will be prohibited from participating in IPO applications for the next 60 days. Users who repeatedly engage in short-term selling will see a decrease in their priority and quantity for future allocations.

Clearing and custody are handled by Apex Clearing Corporation, and users need to participate by completing a FINRA-standard eligibility questionnaire.

Strategic Intent: Using IPO Access for User Growth

The short-term revenue contribution from this feature is likely to be minimal. The commission rate of the selling group is low, and the allocation for Coinbase is limited, meaning the commission from a single Oura transaction could only be from hundreds of thousands to a few million dollars.

But revenue is not the focus. The focus is on user acquisition and retention.

IPO allocations have long been one of the most effective "customer acquisition tools" in the brokerage industry.

If retail investors want to participate in popular IPOs, they must open an account with the broker providing the allocation and deposit funds. Once the funds enter their accounts, users typically stay to do other transactions. Robinhood launched its IPO Access feature with its own IPO as the first offering in 2021, subsequently attracting new users with popular targets like Rivian and Duolingo.

Coinbase's logic is similar but in the opposite direction. Robinhood is expanding from stock users to cryptocurrency, while Coinbase is expanding from crypto users to stocks and IPOs. Both are pursuing the same ultimate goal: a single app for trading all assets.

Brian Armstrong calls this the "Everything Exchange." When a user can buy BTC, purchase Apple stock, and apply for Oura's IPO shares all in the same app, the cost of switching to another platform grows higher.

Coinbase vs. Robinhood, Who Has the Better Position?

Interestingly, Coinbase and Robinhood both appeared in the Oura deal but with completely different roles.

Robinhood Securities is the underwriter, participating in pricing and allocation decisions, receiving a larger share, and having greater influence in the IPO process. This marks Robinhood's first participation as an underwriter in a technology company's IPO, signaling its formal entry into the investment banking territory.

Coinbase Capital Markets is a selling group member, having a more passive role, receiving fewer shares, and not participating in pricing. But Coinbase's advantage lies in its large compliant user base in the crypto industry, with over 110 million verified users. If a considerable proportion of these users are interested in IPO allocations, Coinbase's negotiating leverage to upgrade to an underwriter role in the future will increase.

The competition between the two companies is shifting from "who captures more crypto trading volume" to "who can become the next-generation comprehensive financial platform." Oura's IPO is just a small skirmish in this battle.

Coinbase is transitioning from a cryptocurrency exchange into a comprehensive financial platform that just happens to deal with crypto. IPO allocations are the latest and most symbolic step in this transformation, indicating that Coinbase is no longer just competing with Binance and Kraken for crypto users; it is now competing with Robinhood and Charles Schwab for stock users.

The playing field has changed. The competitors have also changed.