Moody’s Further Downgrades Coinbase Junk Bonds, Joining S&P

Credit-ratings giant Moody’s has downgraded both Coinbase’s (COIN) long-term credit rating as well as its guaranteed senior unsecured notes, it said Friday, citing “substantially weakened revenue and cash flow generation capacity.”

Coinbase’s corporate family rating (CFR), a long-term rating that reflects the relative likelihood of a default on a corporate family's debt, was lowered from Ba3 to B2, both considered non-investment grades. Guaranteed senior unsecured notes were downgraded from B1 to Ba2, the company said.

“The rating action reflects Coinbase's substantially weakened revenue and cash flow generation capacity due to the challenging conditions in the crypto asset operating environment characterized by steep declines in crypto asset prices and lower customer trading activity,” Moody’s said. “Moody's expects the company's profitability to remain challenged despite its [Jan. 10] announcement of a reduction in its global workforce of around 950 employees.”

Read more: Coinbase Cuts Around 20% of Workforce as Crypto Winter Rages

Moody’s also mentioned the fallout from the FTX exchange’s collapse and the possible resulting regulatory tightening on the crypto industry as a reason for the negative outlook on Coinbase’s revenue.

“Although increased regulatory oversight could ultimately favor the relatively more mature and compliant crypto asset platforms such as Coinbase, Moody's said that the path to changes and enhancements in the regulatory framework is highly uncertain and could prove disruptive to crypto market participants.”

Earlier this month, S&P Global Ratings, the biggest global ratings agency, also downgraded its long-term credit rating and senior unsecured debt rating on Coinbase, for similar reasons.

Shares of Coinbase dropped 86% in 2022, partly because trading volume for cryptocurrencies, which continues to be Coinbase’s main revenue stream, slowed after crypto prices dropped sharply during the year, and crypto firms including Three Arrows Capital, Celsius Network and FTX collapsed.

Despite multiple stock downgrades since December, COIN has recovered so far in 2023 and is currently trading 60% higher since the start of the year, mimicking a trend seen in most cryptocurrencies this month. On Friday, Coinbase shares were up almost 11%.