Gemini records a net loss of $159.5 million in the third quarter, despite doubling revenue to $50.6 million, leading to an 8% drop in the stock price pre-market.
Double the Anticipated Loss
The analysts’ forecasts were far exceeded due to massive marketing expenses and costs related to going public, aimed at competing with Coinbase and Kraken.
A Solid but Unbalanced Growth
The company is preparing a Web3 “super app” including regulated prediction markets to diversify its revenue and regain investor confidence.
The first stock market test of Gemini did not go as planned. Despite revenue doubling to $50.6 million, the platform founded by the Winklevoss twins shows a colossal net loss of $159.5 million in the third quarter.
An announcement that immediately cooled the investors: the stock price fell by over 8% pre-market, to $15.38, far from its September IPO price of $28.
The analysts were already expecting a challenging quarter. But Gemini performed worse than expected, with a loss of $6.67 per share, more than double the expected $3.24. The company clearly went all out to compete with giants Coinbase and Kraken, a costly strategy that weighs heavily on its margins.
Our balance sheet remains strong, with ample liquidity and diversified funding to support our growth.
Dan Chen, Gemini’s CFO, during the conference with investors
The good news is that growth is indeed present. Gemini doubled its revenue thanks to increased trading, as well as ancillary products like its crypto credit card and staking services. The performance even exceeds that of Coinbase, which only grew by 55% over the same period. Kraken, on the other hand, also announced a doubling of its revenue last month.
The Bet on a “Super App” to Revive the Machine
Gemini does not intend to be limited to simple crypto trading. The company aims to build a “super application” containing various financial and Web3 services. Next step: the launch of regulated prediction markets, allowing betting on sports or political events. An innovation that is still subject to regulatory approval but could redefine the user experience in the crypto ecosystem.
“We believe this is just the beginning of a new type of market,” said Cameron Winklevoss.
The idea of being able to create a market for any event is fascinating and opens up endless possibilities.
An IPO with a Bitter Taste
For investors, this first statement has a bitter taste. Gemini wanted to make a strong impression upon its IPO, but the cost of visibility and promotional campaigns caught up with them. Whether the long-term model, more diversified, more technological, and less reliant on pure trading, will be enough to restore market confidence remains to be seen.
One thing is certain: the Winklevoss brothers have not said their last word. But for now, Gemini will have to convince that its strategic shift towards the “super app” is not just another dream in the crypto galaxy.
