Shopify CEO Tobias Lütke has been busy buying the dip on Coinbase stock, having scooped up almost $3 million in shares over the past two months.

Lütke, who co-founded ecommerce giant Shopify in 2006, has on average spent roughly $369,000 on Coinbase stock every week since the start of August. 

The billionaire tech entrepreneur became a Coinbase board member in February and currently holds the title of director, which requires him to file trades with the SEC.

All his purchases were made in line with a Rule 10b5-1 trading plan adopted on May 26, 2022, when Coinbase stock traded for just under $70, having fallen nearly 75% since the start of the year.

Lütke has bought Coinbase stock for as little as $62 (in early September) and as much as $97.24 (in mid-August). Overall, he’s bought 40,315 shares for $2,949,833, per SEC filings, at an average price of $73.17.

Coinbase stock traded for $65 at 11:30 am ET, meaning Lütke is down 12% on his purchases so far, representing $330,000 in nominal losses. Blockworks reached out to Lütke but has yet to receive a response. Coinbase declined to comment.

The company awarded Lütke batches of shares in February and June, and he disclaimed beneficial ownership 25,500 shares around the time he was elected to the board. Lütke owns 65,815 Coinbase shares per his latest disclosures, now worth $4.28 million.

But Lütke’s repeated buys are rare among company insiders. In fact, one other Coinbase executive has bought the company’s stock since it went public via direct listing last April: Co-founder Fred Ehrsam.

Ehrsam spent $76.8 million on more than 1.12 million shares throughout May, with trades averaging out to $68.49 per share. This puts Ehrsam in the red by 5%, which works out to $3.35 million in paper losses on those particular trades, at current prices.

Coinbase insiders usually sell their stock

Indeed, it’s far more common for Coinbase insiders to cash in their shares. After all, Coinbase’s direct listing differed from a traditional initial public offering (IPO), in that no new shares were created when it opened for trading on the Nasdaq. All liquidity instead came from existing shareholders.

Early investors and other insiders such as venture capital titan Andreessen Horowitz and tech investor Fred Wilson have taken part, alongside practically the full suite of C-level Coinbase executives including CEO Brian Armstrong, General Counsel Paul Grewal, Chief Financial Officer Alesia Haas, Chief Product Officer Surojit Chatterjee, and Chief Accounting Officer Jennifer Jones, the latter of which sold $595,000 in company stock as recently as August.

In total, Coinbase insiders have jettisoned almost 15.7 million company shares for around $5.8 billion, at an average price of $369.39, according to SecForm4 data compiled by Blockworks — more than 85% of it offloaded during Coinbase’s first day of public trading.

Coinbase stock would need to rise more than 450% to reclaim insiders’ average sale price to date.

Wilson has so far sold more Coinbase stock than any other insider, having generated $3.63 billion across his own sales and that of his investment vehicle, Union Square Ventures.

Coinbase co-founder Ehrsam comes in at number two — he sold a tad over 1.5 million shares for $492.3 million throughout 2021, for an average price of $328.18 — followed by Marc Andreessen with $311.2 million in sales for an average price of $294.15 per share.

Short interest remains steady despite headaches

Coinbase’s shareholders writ large will need strong conviction moving forward. The company faces persistent headwinds going into this year’s fourth quarter that stretch far beyond the bleak general macroeconomic outlook.

“Coinbase is still in the grips of a lot of recent issues, including SEC action, technical issues, terrible financial metrics (huge negative EBITDA) and fee structure,” Oisin Maher, founder of QuantX Analytics, said.

Stock pickers have grown reliant on ‘back-to-basics’ approaches to calculating where to park money to weather inflation and depressed market sentiment, seeking strong balance sheets with clear revenue growth. “I’m not a fan of their heavy use of non-GAAP metrics in their accounting,” Maher said. 

“The stock may have some short-term upside potential, but beyond that, I would prefer to stay away from it.” Coinbase reported a year-on-year 63% drop in revenue in this year’s second quarter, posting a $1.1 billion loss on $803 million revenues, both figures below analyst expectations.

These factors could explain why Shopify’s Lütke stands as the lone Coinbase insider to load up on Coinbase shares last quarter, despite the dip. 

Coinbase’s stable short interest offers one ray of hope. Over the past two months, COIN short interest has hovered between 24.6 million and 26 million shares, equal to about 17% of the float, indicating bets on further substantial dumps are drying up.

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