Technology

Brian Armstrong, CEO of Coinbase, owns nearly $ 14 billion in company shares prior to market debut

Brian Armstrong, Co-Founder and CEO of Coinbase, speaks at TechCrunch Disrupt SF 2018.

Steve Jennings | Getty Images for TechCrunch

When Coinbase hits the public market in the coming weeks, CEO Brian Armstrong will be ready to be among the richest technicians.

Armstrong, who co-founded the cryptocurrency exchange in 2012 after working at Airbnb for a year, owns 39.6 million Coinbase shares between his Class A and B shares. His stake is $ 13.6 billion based on one average private market share price that year of $ 343.58, according to the company’s updated prospectus.

Unlike most tech founders, Armstrong can sell shares immediately after Coinbase goes public. This is because, as part of Coinbase’s direct listing, there is no lock-up period, which differs from an IPO in that the company does not raise fresh capital, but instead allows existing shareholders to sell shares on the open market.

Assuming Coinbase’s private trading suggests where the stock will open, Armstrong will become the newest member of a growing group of tech “decabillionaires”. At the top are Jeff Bezos from Amazon, Elon Musk from Tesla, Bill Gates from Microsoft and Mark Zuckerberg from Facebook, all of whom are valued at over $ 100 billion in IPOs.

Eric Yuan, CEO of Zoom, who floated his video chat company public in 2019, is valued at over $ 16 billion, according to the Bloomberg Billionaires Index. Atlassian’s co-founders Scott Farquhar and Mike Cannon-Brookes are each valued at nearly $ 14 billion, thanks to their company’s IPO in 2015 and the subsequent stock ramp-up. Jack Dorsey’s net worth rose over $ 13 billion, largely because of the Square rally. Shopify’s CEO Tobi Lutke and Snap’s Evan Spiegel are worth over $ 10 billion.

Most of Armstrong’s asset appreciation came in the past year or so, when the value of Coinbase shares in private trading increased more than tenfold. The company generates most of its revenue from trading and storing Bitcoin, which has grown more than 700% over the past year, and Ethereum, which has grown well over 1,000%.

Bitcoin and Ethereum for 12 months

CNBC

But Armstrong was also in the midst of controversy. In a blog post in September, Armstrong told employees that Coinbase would not be an activist company at a time when tensions were high due to the pandemic, racial justice protests and heated presidential elections.

“The reason is because I think these efforts are well-intentioned, but have the potential to destroy a lot of value in most businesses, both by distracting them and creating internal divisions,” Armstrong wrote.

A few months later, the New York Times ran an exposé on Coinbase detailing the black employees’ allegations of unfair treatment within the company, including wage discrimination. Coinbase preemptively posted a blog post attempting to refute the claims.

None of this has hurt the company’s growth as private businesses hit record levels in the weeks leading up to direct listing. However, Coinbase recognizes in the Risk Factors section of its prospectus that a bet on the company is at least in part a bet on Armstrong.

High incentives

“Because we are a founder-run company, action or unfavorable advertising for Brian Armstrong, our co-founder and chief executive officer, could adversely affect our brand and reputation,” the file states. “Such negative publicity could also adversely affect the size and engagement of our customers and lead to a decline in sales that could adversely affect our business, results of operations and financial condition.”

Armstrong is very motivated to keep the momentum going. He was paid $ 1 million last year, even though his total compensation, including all of his option awards, exceeded $ 59 million.

In August, Armstrong received a multi-billion dollar performance award that allowed him to purchase 9.29 million options for $ 23.46 over a 10-year period. The awards are all based on trading the company’s stock at a specified price for 60 days. Based on the private market price, around three quarters of the award will be vested within a short period of time. The highest tranche is $ 400.

SEE: Why betting on Bitcoin miners can be more risky than Bitcoin

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Katherine Clark