The agency downgraded the Coinbase crypto exchange giant’s rating from BB+ to BB, citing “weak earnings” and increasing competition.
In an already rough week, Coinbase took another hit as credit rating agency S&P Global said in a note Thursday that the crypto exchange giant’s outlook is “negative”. pole”.
S&P Global downgraded Coinbase’s long-term issuer credit rating and premium unsecured debt rating from BB+ to BB, citing “weak earnings and competitive pressure.”
“Competitive risks have increased in the crypto exchange sector, with the company’s market share declining this year,” S&P Global wrote.
“We believe that as a result of market share erosion and higher margin compression risk, cyclical variations (peak-to-bottom change in revenue, EBITDA, and EBITDA margin) for Coinbase have exceeded exceeded our previous expectations, prompting us to revise our financial risk assessment.”
The credit agency said its rating also reflects “uncertainty about the length of the current crypto bear market and” the possibility of a continued decline in market share. “
Coinbase shares closed Thursday at $84 per share, down more than 10%. Its shares hit a high of more than $350 last fall.
The S&P note comes two days after Coinbase reported a nearly 30% drop in trading volume from $309 million in the first three months of 2022 to $217 million in the second quarter and missed consensus revenue expectations. The exchange posted a net loss of $1.1 billion for the quarter, compared with a loss of $430 million in the first quarter.
In its quarterly report, Coinbase revealed that it is being investigated by US securities regulators over its token listing processes as well as staking programs and profit-generating products.