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Fenwick & West Sees Coinbase Listing as the Start of Crypto Work

April 28, 2021, 9:31 AM

Fenwick & West lawyers who helped Coinbase become the first publicly traded major cryptocurrency company snuck a crypto reference onto the first page of the company’s filing with securities regulators this month.

They listed Satoshi Nakamoto, the mysterious figure presumed to be—but never identified as—the founder of Bitcoin, among those receiving copies of the document.

It likely won’t be the last chance Fenwick & West lawyers get to slip a crypto “Easter egg” to the U.S. Securities and Exchange Commission. The Silicon Valley-founded law firm represents more than 50 private companies valued at more than $1 billion, which it thinks is the most so-called “unicorns” represented by any U.S. law firm. Three of those companies are are cryptocurrency and digital finance related.

“Coinbase going public is a watershed moment for the crypto industry,” Fenwick & West partner Michael Brown, who advised Coinbase, said in an interview. “It gives a level of credibility to the industry that the SEC has blessed and signed off on the company going public and that the market was so supportive of the stock. We certainly think this paves the way for other companies with a focus on crypto to go public.”

The listing brought enthusiasm for crypto beyond the diehards dedicated to “hodl” the assets for the long-term. (Hodl is crypto industry vernacular encouraging investors hold their positions during periods of volatility.) It was also the first direct listing, where a company’s shares begin trading publicly without an additional sale of equity, onto the NASDAQ exchange.

For Fenwick & West, the listing is an example of how the firm’s longstanding strategy shepherding young technology and life sciences companies from infancy to public markets can still pay off big despite a raft of new competitors vying to represent the most important Silicon Valley tech companies.

Fenwick & West is one of the youngest of the 100 largest law firms in the country, tracing its roots to 1972, when William Fenwick left Cleary Gottlieb Steen & Hamilton’s New York City office to found a law firm in Palo Alto with a handful of other lawyers.

One of the firm’s biggest early successes was representing Apple Inc. founders Steve Jobs and Steve Wozniak as they incorporated their fledgling computer business. Ever since, the firm has followed what is by now a well-worn strategy for Silicon Valley firms: Represent a large swathe of startup companies, and hope some of them hit it big.

Coinbase has the hallmarks of one of those success stories.

By the time of the direct listing, Fenwick & West had already represented Coinbase in more than 15 transactions, including its acquisitions of Bison Trails, Earn.com, and Tagomi. The firm had also advised on more than 70 investments made by Coinbase’s venture arm in companies building new, open financial products.

That’s in addition to an early investment F&W Investments, a vehicle comprised of firm partners, made in Coinbase. That investment totaled less than 0.01% of the company, according to the prospectus filed in February.

Coinbase closed trading on Monday with a market cap of more than $65 billion. Brown and Ran Ben-Tzur, another partner who advised Coinbase on the direct listing, said the firm continues to be a stockholder and “enthusiastic supporter” of the company, but declined to comment further.

Navigating the SEC

Being the first cryptocurrency company to make it through the SEC’s public company review process came with its challenges.

The SEC has expressed skepticism regarding cryptocurrency, especially after a series of high-profile, fraudulent “initial coin offerings.” The agency even went so far as to create its own fake ICO, dubbed HoweyCoins, to warn investors about the risks of investing in the nascent field.

That skepticism hasn’t necessarily abated under new SEC chair Gary Gensler, despite his background teaching courses on cryptocurrencies at the Massachusetts Institute of Technology.

Last week, the SEC pushed ahead with a lawsuit against Ripple Labs Inc. that alleges the company sold a digital token without properly registering it as a security.

Brown and Ben-Tzur said part of their earliest work on the deal was preparing the company’s executives that the process would require more back-and-forth than most deals.

As part of its vision to democratize access to digital finance, the company wanted to answer questions from retail investors through a Reddit “ask me anything” event. Given the SEC’s required quiet period around public listings, that meant the lawyers rounded up questions on Reddit, publicly reported them to the agency, and then simultaneously released a video of the answers to Reddit and a written script of the answers to the SEC.

“The laws around crypto are still very gray,” Ben-Tzur said. “This isn’t an enterprise software company. The SEC has signed off on those documents 100 times over. There’s only one crypto-based company that has filed to go public, and that’s Coinbase.”

Silicon Valley has long been one of the most competitive legal markets in the country. But that has intensified over the past year with the entrance of elite law firms including Freshfields Bruckhaus Deringer, Paul, Weiss, Rifkind, Wharton & Garrison, and Debevoise & Plimpton.

Despite the new competition, Fenwick turned in one of its best financial years in recent memory in 2020. The firm’s revenue was up 15% to $543 million, and its profits per equity partner surged 31% to $2.85 million.

“Our approach is to work with companies at their earliest stages, into their growth stage, and through a sale or becoming a public company,” Brown said. “We are confident our intense focus on the needs of life sciences and technology companies gives us a competitive advantage to firms who are already here or who may seek to start focusing on those types of companies.”

To contact the reporter on this story: Roy Strom in Chicago at rstrom@bloomberglaw.com

To contact the editors responsible for this story: Rebekah Mintzer at rmintzer@bloomberglaw.com; Chris Opfer at copfer@bloomberglaw.com

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