The much-anticipated Gemini IPO is here, and all indications are that the GEM stock will go parabolic after listing.
Media reports suggest that the company has limited the amount of money it will raise to $425 million, a rare event during IPOs, and it is a sign that it has become oversubscribed by about 20 times.
Gemini IPO is Seeing Robust Demand
The main reason for the soaring demand is that the IPO is associated with the Winklevoss Twins, who won a payout from Facebook and who are some of the biggest holders of Bitcoin and Ethereum. Bloomberg reports that the GEM stock price will be between $24 and $26.
The other reason for the rising demand is that many of the recent IPOs, like Klarna, Figure, Circle, and Bullish, have seen their stocks surge shortly after the IPO.
Still, there are three main reasons to avoid the Gemini stock after the IPO happens. First, while newly listed companies have gone parabolic this year, their performance has not been consistent thereafter. Circle stock price has plunged by over 50% from its all-time high. Similarly, Bullish stock has tumbled to a record low.
Other companies that went public this year, like CoreWeave, eToro, and WeBull, have all plunged after their initial pop, and Gemini could do the same.
The other risk is Gemini’s business model, which relies heavily on transactions. Its other businesses, such as its stablecoin, Nifty Gateway Studio, and credit card, represent a small portion of its overall business.
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A crypto exchange that relies heavily on transactions is always at risk during a bear market in the crypto industry. This explains why Coinbase has worked hard to introduce new solutions like staking, Base Blockchain, and custody. Its non-transaction business is almost equal to the other one today.
Gemini Business is Seeing Big Losses
Gemini’s business is not going well, as its financials show. The company’s total revenue rose from $98 million in 2023 to $142 million in 2024. Recently, however, it made $68 million in the first half of the year, down from $74 million in the same period last year.
Gemini is also losing a lot of money, with its total loss in the year’s first half jumping to $113 million from $84 million last year. Its long history of loss-making has pushed the Winklevoss Twins to inject cash into the business several times before. As a publicly traded company, this means potential dilution in the future.
Finally, Gemini has struggled to gain substantial market share in the crypto industry despite its popularity.
Data by CoinMarketCap shows that its 24-hour volume in the spot market was just $197 million, a negligible amount as Binance handled volume worth $23 billion in this period. Other companies like Bybit, Coinbase, Upbit, MEXC, HTX, and Crypto.com had over $3 billion in volume in this period.
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