24. February 2024

• The Coinbase (COIN) share price surged 24% on Thursday following a US District Court ruling that XRP is not a security.
• The rally was driven by investors who interpreted this ruling as rejection of the SEC’s lawsuit against Coinbase from June.
• However, Berenberg believes the surge in share price is overinflated and immaterial to Coinbase as the judge didn’t reject the argument.

Coinbase Shares Surge After XRP Ruling

The crypto exchange Coinbase (COIN) saw its shares surge 24% Thursday following a U.S. District Court ruling that XRP is not a security. Investors interpreted this decision as rejection of the Securities and Exchange Commission’s (SEC) case against Ripple Labs, filed in June.

Berenberg: Rally Overdone

However, investment bank Berenberg said in a research report that the extent of the rally may not be warranted. According to them, Judge Torres’ ruling pertained solely to primary market transactions through which Ripple sold XRP and was immaterial to Coinbase since it facilitates secondary-market transactions on its exchange.

SEC Lawsuit Against Coinbase

The SEC had sued Nasdaq-listed crypto exchange Coinbase for allegedly violating federal securities law by operating as an unregistered broker, exchange and clearing agency simultaneously. It had also solicited customers, handled orders, allowed for bids and acted as an intermediary all at once according to the regulator’s allegations.

Price Target & Rating

Berenberg has set a hold rating on Coinbase shares with a price target of $39 while it closed yesterday at $107.

Conclusion

Overall, while investors were optimistic about Tuesday’s ruling being seen as rejection of the SEC’s lawsuit against Coinbase, Berenberg believes that this rally may be overinflated and does not necessarily have implications for Coinbase’s business model or its stock performance going forward.