What Happened?
Shares of blockchain infrastructure company Coinbase (NASDAQ: COIN) jumped 9.3% in the afternoon session after the company clarified that the SEC's inquiry was related to a discontinued user-metric last reported more than two and a half years ago.
Coinbase's Chief Legal Officer, Paul Grewal, explained, "This is a hold-over investigation from the prior administration about a metric we stopped reporting two and a half years ago, which was fully disclosed to the public."
Some Wall Street analysts stayed positive despite the negative news, particularly in light of a cybersecurity breach disclosed the previous day. Oppenheimer analyst Owen Lau reaffirmed a Buy rating, saying the stock's negative reaction to the news was an opportunity for investors to accumulate more shares. Lau added "While we think the expected remediation cost of $180-$400M is high, we believe COIN intends to send a message that customers' funds are safe, and they will take full responsibility."
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What The Market Is Telling Us
Coinbase’s shares are extremely volatile and have had 66 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 5% on the news that the company announced it got emails from hackers who claimed they broke into user accounts, accessed customer data, found internal documents, and took notes tied to help desk tools and account management systems.
Coinbase maintained it would not pay the $20M ransom demanded by the attackers and instead offered a $20M reward for information leading to their arrest and conviction. It also clarified that the breach affected less than 1% of Monthly Transacting Users (reported at 9.7M as of 1Q25).
In a regulatory filing, Coinbase estimated the total cost of the incident, including efforts to address the breach and reimburse affected customers, could range from $180 million to $400 million.
The stock's reaction suggested the market was worried about the material short-term financial headwind the incident could create.
However, the limited scope (affecting less than 1% of Monthly Transacting Users) of the incident and the containment measures could dampen some of these concerns.
Coinbase is up 3.8% since the beginning of the year, but at $267.09 per share, it is still trading 22.3% below its 52-week high of $343.62 from December 2024. Investors who bought $1,000 worth of Coinbase’s shares at the IPO in April 2021 would now be looking at an investment worth $813.60.
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