Coinbase CEO fulfills pledge to sell 2% stake — now he could sell another 5%

Brian Armstrong told Twitter a year and a half ago that he intended to sell 2% of his Coinbase stake to fund other ventures.

“I’m sharing this as I want you to hear it from me first,” the exchange’s co-founder and CEO said.

He did exactly that. Between November 2022 and November 2023, Armstrong sold about 790,000 Coinbase shares, equivalent to 2% of the ownership stake disclosed in Coinbase’s prospectus ahead of its direct listing in April 2021.

Armstrong raked in nearly $53.2 million across that period, selling shares for $67.37 on average, per OpenInsider data compiled by Blockworks, which references filings from the Securities and Exchange Commission.

Coinbase stock trades around $164 and that 2% stake would have now been worth $129.5 million. So, Armstrong’ effectively left $76 million on the table by selling too soon.

Armstrong’s idea was to funnel the cash into startups at the cutting edge of other industries. NewLimit, which Armstrong co-founded alongside three others, wants to reprogram human cells to extend lifetimes.

Armstrong also co-founded ResearchHub with former medical student Patrick Joyce. The startup aims to overhaul the incentive systems of academic and scientific publishing by mixing open source sensibilities with crypto crowdfunding.

NewLimit also raised $40 million last year — about eight months after Armstrong’s pledge — in a Series A with participation from Peter Thiel’s Founder’s Fund, Dimension and Kleiner Perkins.

ResearchHub itself raised $5 million one month later from investors including Replit CEO Amjad Masad and Bob Young, the founder of open source software stalwart Red Hat.

But Armstrong hasn’t stopped selling Coinbase stock since hitting the 2% mark. He’s offloaded 316,150 shares since November, equal to nearly another whole percentage point worth of his stake.

The chart below shows all Coinbase insider trades disclosed to the SEC since the day after Coinbase’s direct listing.

Squares represent sales from insiders other than Armstrong.
Circles point to COIN purchases by Shopify CEO Tobias Lütke and Paradigm, the fund started by Coinbase co-founder Fred Ehrsam.
Green plus symbols are exactly where Armstrong has sold.

Armstrong’s sales have been steady for more than a year

So, it took Armstrong a full year to sell 2% and now he’s sold almost half that again in three months. He pulled in $44.6 million across that time, netting $141 per share on average.

Blockworks reached out to Coinbase to confirm whether Armstrong was indeed reducing his stake further than the initial 2%.

A spokesperson pointed to a previously unreported disclosure in Coinbase’s quarterly report filed last November.

The disclosure states that Armstrong had entered into a trading plan designed to sell up to 1.8 million shares in one year starting November 2023 — the same month Armstrong fulfilled his 2% pledge.

Napkin math puts that 1.8 million shares at nearly 5% of Armstrong’s remaining stake at the time of the disclosure, currently worth around $295 million. Coinbase’s market value is today just under $40 billion.

The number of shares sold by Coinbase insiders to date is equivalent to 16.4% of common shares outstanding

Provisions for trading plans for other Coinbase executives were also included. Chief legal officer Paul Grewal, chief operating officer Emilie Choi and director Fred Ehrsam are together in line to sell up to 3 million shares this year, currently worth $489 million.

Coinbase went public via a direct listing, which differs from a traditional initial public offering in that no new shares are created. Insiders like Armstrong instead contribute to day-one market liquidity by selling off their own shares directly to the public.

Executives, directors and other major investors sold $5 billion in Coinbase stock during its first trading session. Coinbase stock tanked almost immediately, opening at $381 before losing 40% of its value over the following two months.

COIN went on to lose another 85%, bottoming below $32 last January and has since staged a healthy recovery alongside bitcoin and the wider crypto market.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.