Not Very Bullish? Peter Thiel-Backed Crypto Stock Is Overpriced, Says Compass Point

Analysts at investment bank Compass Point initiated coverage of crypto exchange Bullish with a neutral rating and a $45 price target, about 16% below its current price, and amid wariness about its ability to crack the U.S. market.

Ed Engel and Abdullah Dilawar wrote that the U.S. Congress had yet to pass the CLARITY Act, market structure legislation that would clarify the jurisdictions of the Securities and Exchange Commission and Commodity Futures Trading Commission. New York State’s restrictive BitLicense could also hinder Bullish’s efforts, they wrote.

“We have a hard time seeing Bullish entering U.S. markets until Congress passes market structure legislation,” the analysts wrote. “Until then, NYDFS [New York Department of Financial Services] is viewed as the industry’s de facto U.S. regulator.”

They added: “NYDFS is historically less hospitable to novel blockchain technologies which leaves us cautious towards Bullish’s Bitlicense approval. While the company is extremely transparent with its AMM [automatic market maker]  liquidity and algorithm, we have a hard time seeing NYDFS issues a Bitlicense to an exchange that acts as a market maker on its own exchange.”

Bullish shares (BLSH) closed down 12% Wednesday to trade a little over $54. The Peter Thiel-backed exchange debuted on the New York Stock Exchange last month, with shares hitting as high as $118 after being offered for $37 in the IPO. The analysts noted that BLSH seemed overvalued with shares trading at 110 times their core operating profit and 68% over its IPO price.”

Despite their concerns, the analysts wrote that if Bullish secures a U.S. license, it could become a formidable competitor to Coinbase, which dominates institutional trading in the U.S., noting Bullish’s low fees. 

“We think there could be a better buying opportunity within 1-2 quarters,” the analysts wrote.

They also wrote: “We believe competitive pricing can help it take market share from Coinbase which dominates institutional spot markets,” the analysts wrote. “COIN’s institutional fee rates are above international exchanges alongside limited competition domestically.”

Bullish allows clients to buy, sell, and bet on the future price of digital coins and tokens, with a focus on institutional investors rather than retail traders. It currently targets traders in Europe and Hong Kong.

Coinbase—America’s biggest exchange (COIN)—went public in 2021. Its share price is down more than 11% since then, despite reaching an all-time high of $444 in July. 

Bullish’s debut follows closely after other public offerings by crypto-focused companies. San Francisco-based Circle, which issues the USDC stablecoin, had a roaring June NYSE debut when its stock tripled from its original IPO price of $31 per share to a peak of $299. It was recently trading at close to $119. 

And brokerage platform eToro’s stock closed 29% higher following its Nasdaq debut in May.

Bullish CEO Tom Farley, who previously was NYSE’s president, said in August that the firm timed its IPO to the intended to IPO as “the digital assets industry is beginning its next leg of growth.”