How Some Investors Made 6,567% On The Coinbase IPO

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Coinbase Global Inc. (COIN) made history last month with the biggest-ever direct listing; its debut market cap was $63.5 billion, and after some big swings, it closed its first day at nearly $86 billion. For all of that, retail investors who managed to grab shares at the $381 "opening price" and hung in there until 4 p.m. ended up losing around 18% of their stake when shares closed at $310.

Now, this didn't necessarily make it onto CNBC, but there was an entire class of savvy investors who not only didn't lose 18%, but in fact made an absolute killing that day. Whether they made millions of times their initial investment or "merely" tens of thousands of times their buy-in, these folks were perfectly positioned.

Let me show you how those extreme profits were locked in, because this was not some one-off lucky break or complicated trading strategy. These people, many of whom are now ultra-wealthy, simply made a smart choice at the right time. With the deal I'm going to fill you in on in a second, you could, too.

How Early Coinbase Investors Did So Well

When COIN shares hit the exchange, their market cap was bigger than FedEx Corp. (FDX), Twitter Inc. (TWTR), and even General Motors Co. (GM). No real mystery there; it has 56 million registered users who trade $335 billion in volume on the exchange every quarter.

Co-founder Brian Armstrong is now one of the world's richest people; his stake was worth a reported $16 billion the day of the direct listing. But of course, it didn't start out like that. Nine years ago, Coinbase was a tiny San Francisco–based startup company led by co-founders Brian Armstrong and Fred Ehrsam. At that time, one Bitcoin (BITCOMP) was worth just $6.

A little over a year later, Coinbase was still worth just a fraction of what it is right now. It was a fresh-faced graduate from Y Combinator, a startup accelerator that's worked with ventures that have gone onto become modern institutions, like Stripe, Dropbox Inc. (DBX), and Reddit.

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Disclaimer: Any performance results described herein are not based on actual trading of securities but are instead based on a hypothetical trading account which entered and exited the suggested ...

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