‘Uncertain scale’ of SEC charges is cited as the reason for Moody’s downgrading of Coinbase

Meanwhile, Berenberg Capital, a financial services business, informed Cointelegraph that it considered Coinbase shares “uninvestable” for the foreseeable future.

Moody’s Investors Service released a statement on June 8 explaining the downgrading, citing worries about the effect of the SEC’s action on Coinbase’s day-to-day operations.

The rating agency saw cash and equivalents of $5 billion favourably compared to the $3.4 billion in long-term debt.

The company also said that it thinks Coinbase will keep its “focus on expense management,” which has helped it deal with past transaction revenue drops.

It wasn’t only Moody’s that changed its mind about Coinbase. Berenberg Capital reaffirmed its “hold” recommendation to clients but lowered its price estimate for COIN shares from $55 to $39.

Berenberg research analyst Mark Palmer told Cointelegraph in an email that the firm’s belief that coinbase’s already dismal Q2 trading volumes might “persist and intensify” as a consequence of the SEC’s accusations led to the fall in price target:

“Some investors may minimise their exposure to COIN’s platform in light of the possible substantial effect the resolution of the litigation might have on COIN’s U.S. operations.”

Palmer also pointed out that the SEC’s “desired remedy” would mean shutting down COIN’s primary commercial operations, which are its staking services. Therefore, Palmer suggested that people postpone plans to buy Coinbase stock for now. “We do not recommend investing in COIN shares at this time.”

Cathie Wood, CEO of ARK Invest, seemed unconcerned by Palmer’s claims that Coinbase is uninvestable. Wood told Bloomberg that the increased regulatory scrutiny of Binance, a rival cryptocurrency exchange, was beneficial for Coinbase in the long term.

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