Why Does Shopify CEO Tobi Lutke Keep Buying Coinbase (COIN) Stock?

  • Lutke purchased 5,177 shares of Coinbase (NASDAQ:COIN) stock on Aug. 23.
  • This is his third purchase of the cryptocurrency company this month.
  • Shares of COIN stock are down more than 65% year-to-date.
COIN stock - Why Does Shopify CEO Tobi Lutke Keep Buying Coinbase (COIN) Stock?

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Shares of Coinbase (NASDAQ:COIN) stock are in focus following yet another insider purchase by Director and Shopify (NYSE:SHOP) CEO Tobi Lutke. Lutke became a director of Coinbase in February, joining the ranks of co-founder Fred Ehrsam and Andreessen Horowitz CEO Marc Andreessen.

Shares of COIN stock have declined by more than 65% year-to-date (YTD) in the midst of a crypto winter. Meanwhile, both Bitcoin (BTC-USD) and Ethereum (ETH-USD) have fallen by more than 50% YTD. With a decline in crypto prices comes a decline in trading volumes, which has caused Coinbase’s revenue to plummet. In June, the company announced that it would lay off 1,100 employees, or about 18% of its total workforce. CEO Brian Armstrong cited falling crypto prices and over-hiring as the reasons for the layoffs.

However, fewer employees means lower general and administrative costs. With the stock more than cut in half since the beginning of the year, Lutke is taking the opportunity to buy shares.

COIN Stock: Tobi Lutke Purchases 5,177 Shares

On Aug. 23, Lutke purchased 5,177 shares of COIN at an average price of $71.94 per share. This is his third purchase of the company this month, and month-to-date, he has now purchased a total of 13,130 shares. In addition, all three purchases were enacted via a prearranged 10b5-1 trading plan that was established on May 26. The trading plan hints that more purchases may be on the way.

The Shopify CEO’s purchases are highly interesting, as Armstrong has mentioned that Coinbase is in the process of shifting itself toward a subscription-based model, much like Shopify. Trading fees bring in plenty of revenue during bull markets, but decline in the event of bear markets. An introduction of a subscription-based model could insulate revenue during long periods of declines. Armstrong explained:

“We’re realizing that trading fees… [are] still gonna be a big part of our business ten years from now, even twenty years from now, but I’d like to get to a place where more than 50% of our revenue is subscription and services.”

During 2020, subscriptions and services accounted for 4% of revenue. Now, that figure has risen to 18% of total revenue. Subscriptions that Coinbase currently offers include Coinbase One, Coinbase Cloud and USDC (USDC-USD) custody services.

On the date of publication, Eddie Pan held a LONG position in SHOP. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/08/why-does-shopify-ceo-tobi-lutke-keep-buying-coinbase-coin-stock/.

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