Coinbase (COIN) shares jump 9.3% after the company clarifies the SEC's inquiry was related to a discontinued user-metric

Shares of blockchain infrastructure company Coinbase (NASDAQ: COIN) jumped 9.3% in the afternoon session after the company clarified that the SEC's inquiry was related to a discontinued user-metric last reported more than two and a half years ago.

Shares of blockchain infrastructure company Coinbase (NASDAQ:COIN) jumped 9.3% in the afternoon session after the company clarified that the SEC's inquiry was related to a discontinued user-metric last reported more than two and a half years ago.

This follows a report by Bloomberg, which stated that the SEC is investigating whether Coinbase had improperly collected and used user data to calculate and disclose a metric called "monthly transacting users." The report also mentioned that the probe could be linked to a prior administration inquiry.

Coinbase's Chief Legal Officer, Paul Grewal, confirmed in a blog post that the inquiry had been reported previously and that the metric was discontinued in the first quarter of 2021. He added that the company had made full and complete disclosures about the metric in its periodic and current reports filed with the SEC.

"This is a hold-over investigation from the prior administration about a metric we stopped reporting two and a half years ago, which was fully disclosed to the public," Grewal said. "The SEC inquiry is limited in scope and relates to a metric we used to report on the number of users who transacted on the Coinbase platform at least once in a given month, which we disclosed in a section of our earnings releases titled 'Key User Metrics.'"

Some analysts stayed positive despite the negative news, particularly in light of a cybersecurity breach disclosed the previous day. Oppenheimer analyst Owen Lau reaffirmed a Buy rating, saying the stock's negative reaction to the news was an opportunity for investors to accumulate more shares.

"We remain optimistic on COIN’s long-term potential in the rapidly growing digital asset ecosystem and believe the company will continue to play a key role in shaping the future of finance," Lau stated.

While he thought the expected remediation cost of $180-$400M was high, he believed COIN intended to send a message that customers' funds were safe, and they would take full responsibility.

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What The Market Is Telling Us

Coinbase's shares are extremely volatile, and they've already had 66 price changes of 5% or more over the past year. In this context, today's move suggests that the market considers this news to be meaningful but not something that would fundamentally alter its perception of the business.

The previous big move we wrote about was 1 day ago when the stock dropped 5% on the news that the company announced receiving emails from hackers who claimed to have breached user accounts, gained access to customer data, discovered internal documents, and took notes tied to help desk tools and account management systems.

Coinbase maintained that it would not pay the $20M ransom demanded by the attackers and instead offered a $20M reward for information leading to their arrest and conviction. It also clarified that the breach affected less than 1% of Monthly Transacting Users (reported at 9.7M as of 1Q25).

In a regulatory filing, Coinbase estimated the total cost of the incident, including efforts to address the breach and reimburse affected customers, could range from $180 million to $400 million.

The stock's reaction suggested that the market was worried about the material short-term financial headwind the incident could create. However, the limited scope (affecting less than 1% of Monthly Transacting Users) of the incident and the containment measures could dampen some of these concerns.

Coinbase is up 3.8% since the beginning of the year, but at $267.09 per share, it is still trading 22.3% below its 52-week high of $343.62 from December 2024. Investors who bought $1,000 worth of Coinbase’s shares at the IPO in April 2021 would now be looking at an investment worth $813.60.

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