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Citi downgraded Coinbase stock from “Buy” to “Neutral” - 2
Uncertain regulatory system main reason for Coinbases’s downgrade – Cii Analyst - 3
Citi facing two class action lawsuits apart from the SEC tussle
Coinbase, a Crypto Exchange whose stock prices plummeted 1.6% pre-trading hours was downgraded by Citi analysts during Monday after-trading hours where the group downgraded the stock from a Hold to Buy. Christiansen the Cii analyst who downgraded the rating believes that until clear rules aren’t established by the regulators in the United States the stock will continue to remain “weighed down”
Citi’s analysis
As per reports, the company was downgraded from a “Buy” to “Neutral” by the Citi analyst citing that there are too many unknowns and a high level of uncertainty that the company is facing right now with the regulators.
Peter Christiansen, Citi’s Analyst believes that Coin is a category leader and it is a very well-positioned Crypto platform if the regulations are set right it can perform well. Despite saying this the Analyst lowered the share’s target from $80 to $65. He further explained that “Coinbase is now tasked to advocate for a reputationally damaged industry and pave a sustainable pathway towards regulatory compliance.”
Coinbase and its continuous problems
Coinbase has been battling with legal problems for quite some time now. Coinbase disclosed that it received notice from Wells regarding securities violations in March from the Securities and Exchange Commission. The stock price of Coinbase slumped 16% after the Wells notice on March 22. This indirectly signals that the company can face enforcement actions in the future. Coinbase then in April gave it back to the SEC by filing against them to give clarity on their regulations for certain digital assets.
Coinbase CEO Brian Armstrong and Chief Legal Officer Paul Drewal Later in the month released a public response on their Youtube Channel to the Wells notice they received in March.
Peter Christiansen, an analyst from Citi wrote that every debate around Coinbase long or short is related to the regulatory predicament and he explained a few scenarios of how the situation might play out.
Christiansen explained three scenarios in which the situation can play out. The first one is the obvious one where the Cinbase and SEC are involved in a long legal battle and where the possibility of Nan operating Injunction cannot be ruled out. The second scenario is where the long-awaited regulations and the legislative movement happen amid a challenging and busy legislative calendar and elections coming ahead. The third scenario is where Ripple’s ongoing can set the potential precedent.
Apart from the ongoing legal problem and tussle with the SEC the company also got two class action lawsuits. The first one alleges that its customer biometric collection breached privacy laws in Illinois and the second lawsuit alleged the company of Insider trading where certain executives profited from insider information during the time company went public.
Citi analyst Christiansen preferred to stay on the sideline with Coinbase share until regulators layout rules in the U.S. Market
Source: https://www.thecoinrepublic.com/2023/05/03/citi-downgrades-coinbase-rating-amid-uncertain-u-s-regulations/