Moody's Places Coinbase (COIN) Credit Ratings on Review for Upgrade

Moody's (NYSE:MCO) Ratings has placed all credit ratings of Coinbase Global, Inc. (NASDAQ:COIN) on review for upgrade

Moody's (NYSE:MCO) has placed all credit ratings of Coinbase Global , Inc. (NASDAQ:COIN) under review for a possible upgrade. The move comes after the previously stable outlook was changed.

The review for upgrade follows Coinbase's announcement that it has reached an agreement with the US Securities and Exchange Commission (SEC) to dismiss pending litigation against the company. This is subject to approval by the SEC's commissioners. The review also reflects significant improvements in Coinbase's financial profile and liquidity position. Despite this, Coinbase remains exposed to the volatility of the crypto assets it allows its clients to trade and store.

Coinbase's revenue, earnings, and cash flow all saw robust growth in 2024 thanks to stronger crypto market conditions. This led to a substantial increase in Coinbase's liquidity, with cash and other USD resources reaching $9.3 billion as of December 31, 2024, compared to $4.3 billion in debt. Coinbase's debt/EBITDA leverage ratio was 1.8x at the end of 2024, its lowest level since late 2021.

The review for upgrade will assess the sustainability of Coinbase's profitability and operating leverage, including its cost flexibility and ability to weather a potential extended crypto market downturn. It will also evaluate Coinbase's financial policies and plans for shareholder distributions, debt issuances, and M&A. Moreover, Coinbase's strategic and expansion plans will be reviewed, including the risks related to its ongoing international expansion and the level of diversification. The review for upgrade also depends on the final approval of SEC commissioners to dismiss its current litigation against the company.

While the ratings are on review for upgrade, a near-term downgrade is unlikely. However, Coinbase's ratings could be downgraded under certain conditions. These include a substantial decline in the company's liquidity position, significant regulatory penalties, or the significant incremental deployment of cash resources into areas other than debt repayment. A strategic or mandated revamp of its business model leading to lower revenue or increased costs and leading to negative retained cash flow could also lead to a downgrade. Substantial and sustained reduction in revenues not offset by prudent expense management, or a significant operational incident, including a cyber attack, that results in financial loss or reputational harm, could also lead to a downgrade.

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