Kynikos Associates founder and famed short seller Jim Chanos is back at it again. He announced a new short position in Coinbase Global Inc (NASDAQ:COIN) Friday after the market closed on CNBC's "Closing Bell: Overtime."
"Coinbase is what we would call one of the bubble stocks," Chanos said.
Chanos believes Coinbase's valuation is stretched as a consequence of being one of the only publicly-listed crypto exchanges.
Last fall, when the stock was trading between $200 and $300 per share, the adjusted earnings estimate for 2022 was $7, Chanos said. The estimate has since fallen to $3, he said, adding that the stock is actually trading at a higher valuation on a price-to-earnings basis than it was when the share price was much higher.
"We basically think Coinbase is overearning," Chanos said. "If you do the numbers, their revenue base is roughly 3% to 4% of their custodian assets."
Compared to similar exchanges, said revenue base percentage is very high, he noted.
"We think as competition increases amongst the exchanges, you're going to see fee compression and as it is Coinbase will probably not be profitable this year," Chanos said before highlighting the company's $40 billion market cap.
If Bitcoin (CRYPTO: BTC) starts surging again and Coinbase trades in sympathy with the oldest cryptocurrency, Chanos warned that his short thesis could be at risk. "But what we're seeing is the economics are starting to diverge," he said, suggesting that Coinbase's stock is unlikely to track Bitcoin moving forward.
COIN Price Action: Coinbase has traded between $150.12 and $429.54 over a 52-week period.
The stock was down 1.92% after hours at $182.37 at press time.
Photo: courtesy of Coinbase.
