Gemini IPO Stumbles as Profitability Concerns Shadow the Exchange

New York City-based crypto exchange Gemini Space Station Inc, saw its stock surging after initial public offering (IPO) in September but then it dropped quickly, which left a lot of investors cautious. At the time, the IPO raised $446.3 million, but the stock is now down more than 11% as competition and lack of profit is challenging the company.

Right now, Wall Street is split on how the exchange will recover with six analysts giving buy-equivalent ratings and five hold-equivalent ratings, according to a Bloomberg report.

Early Hype Fades Quickly

On the first trading day, Gemini’s stock jumped 14%, helped by the twins founders, Cameron and Tyler Winklevoss’ political connections and also the frenzy around other crypto companies like Circle Internet Group and Bullish which recently had successful stock launches.

However, this surge did not last long as the stock is now down more than 11%. Meanwhile, its competitors are doing better. Circle shares have soared over 370% since their IPO, and Bullish is up more than 75%. Analysts say Gemini is playing catch-up.

Citigroup’s Peter Christiansen, who maintains a neutral rating, said: “We believe investors can wait for more execution proof-points in rebuilding the user base, institutional partnerships, and providing a better line-of-sight towards profitability.”

Profit Challenges Since IPO Launch

So far, Gemini is not making a profit yet. In the first half of the year, the company lost $282.5 million while earning $68.6 million from trading fees. Most of its income comes from people trading on the platform, but it has spent a lot on marketing to attract more users.

Another problem was the Earn program, which gave customers interest in cryptocurrency deposits. After the 2023 crypto crash, the program’s partner, Genesis Global, went bankrupt. Gemini had to pay $37 million to the New York Department of Financial Services and $50 million to the New York Attorney General, though it did not admit any wrongdoing.

One bright spot is Gemini’s crypto rewards credit card, which offers users cashback in cryptocurrency. Truist Securities analyst Matthew Coad said the card helps the company earn more money and get more users. However, he warned that the stock could still be very unpredictable because the overall crypto market is unstable.