Coinbase Shares Are 'Uninvestable' in the Near Term: Berenberg

Coinbase (COIN) shares are "uninvestable" in the near term, investment bank Berenberg said in a research report Thursday.

The company was already expected to report weak second-quarter 2023 trading volumes before the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against the crypto exchange on Tuesday, the report said.

This weakness may now persist and intensify “due to the overhang that the lawsuit has created,” analyst Mark Palmer wrote. "The upshot is that we view COIN shares as uninvestable in the near term."

The bank maintained its hold rating on the stock, and slashed its price target to $39 from $55. Coinbase shares were trading 2.4% higher at $54.47 at time of publication.

“Given the potentially significant impact of the lawsuit’s outcome on Coinbase’s U.S. operations, we would expect some investors to reduce their exposure to its platform,” the note said.

Berenberg says that more uncertainty was created by a task force of 10 U.S. states that alleges the exchange’s staking rewards program violates state securities laws. That only adds to the extent of the negative overhang on the company’s share price, the bank said.

The SEC’s desired remedy would probably require the complete closure of Coinbase’s core business in the U.S., and this will also weigh on the shares, the report added.

Read more: MicroStrategy Shares Offer Better Exposure to Crypto Than Coinbase: Berenberg

UPDATE (June 8, 15:49 UTC): Adds "uninvestable" quote from report in third paragraph.