There is some excellent news amid the crypto winter. After it was reported that billionaire Sam Bankman-Fried’s cryptocurrency exchange, FTX, was considering a purchase of Robinhood just over a month after he first acknowledged a stake, shares of popular stock trading app Robinhood have climbed higher and kept the movement going.
Vlad Tenev and Baiju Bhatt founded Robinhood in 2013 as a mobile-friendly stock brokerage. The platform has more than 17 million active users and debuted on the NASDAQ stock market in 2021. In 2018, Robinhood added cryptocurrency trading, allowing customers to trade 11 different cryptocurrencies.
Only users in the United States and the United Kingdom are able to use the crypto entity. It is licensed in 27 states, as well as being a member of the Financial Industry Regulatory Authority (FINRA). The SEC also oversees it as a publicly-traded business.
According to people familiar with the situation, one of the world’s largest cryptocurrency trading platforms, rivaling Coinbase and Binance, is internally discussing how to take over Robinhood. As reported by Bloomberg, FTX is considering acquiring Robinhood entirely.
The news sent shares of Robinhood soaring by 18%, which was quickly halted for trading at 3:10 p.m. EDT. After trading resumed at 3:15 p.m., the stock maintained most of its gains, rising 14% Monday night. The shares are still on an upswing on Tuesday, with investors showing renewed interest.
To this day, no formal takeover offer has been made to Robinhood. According to Bloomberg, though, FTX has not decided whether or how to proceed with the transaction yet and may choose not to do so.
Bankman-Fried called Robinhood shares “an attractive investment” in May 2022. On May 14, the shout-out pushed the stock up more than 20% in one day. In the first half of 2022, Robinhood shares have underperformed mainly compared to the broader market’s drop of around 50%, falling over 50% compared to the S&P 500.
Robinhood investors are less optimistic as the firm continues to struggle with sluggish user growth on its platform, as well as declining trading profits. Robinhood shares today trade at around $10 each, still a long way from the record high of $85 last August.
Forbes’ estimates put Bankman-Fried’s net worth at $20.6 billion. He is now one of the wealthiest people in crypto, with his organization reaching a $40 billion valuation by the start of 2022 after launching FTX in 2019.
FTX explores a deal to buy Robinhood
According to a recent report from regulatory filings, billionaire Sam Bankman-Fried, the creator and CEO of FTX, now owns a 7.6 percent stake in Robinhood worth about $650 million. Following the disclosure a month ago, the entity has planned a takeover on the platform that offers unique crypto trading options.
Bitcoin, Ethereum, and other cryptocurrencies have been shaken by a massive selloff this year as investors flee to safer bets in the face of growing rates, high inflation, and impending recession anxieties. Bitcoin’s price fell below $20,000 earlier this month amid reports that several cryptocurrency businesses were stopping sales or announcing staff reductions.
On Monday, the Wall Street investment bank Goldman Sachs increased its rating on Robinhood shares from sell to neutral in a report that downgraded Coinbase (COIN) stocks owing to the significant price drop in cryptocurrencies and subsequent trading activity.
According to sources, while no decision has been made to pursue a takeover, FTX is taking the issue seriously. According to a contact at Bloomberg, whether or not FTX makes contact with Robinhood with a buyout offer is still to be determined.
In a follow-up statement to Bloomberg, FTX CEO Sam Bankman-Fried addressed rumors of a possible tie-up with Robinhood, stating that while they are interested in doing so, there are no active merger discussions.
We are excited about Robinhood’s business prospects and potential ways we could partner with them […] That being said, there are no active M&A conversations with Robinhood.Sam Bankman-Fried
Bankman-Fried’s firms, FTX and Alameda Research, have provided loans to crypto companies in difficulties in recent days, with some comparing his approach to Warren Buffett’s during any financial crisis.
In the wake of a massive financial crisis, Bankman-Fried’s decisions might be seen as both a profit opportunity and the use of reverse contagion in an industry where companies are still closely linked in their financial interactions.
Despite the fact that cryptocurrency winter has set in, FTX continues to flourish. The firm recently offered a $250 million bailout offer to Bitcoin lender BlockFi, and earlier this month, it signed a deal to buy Canadian cryptocurrency exchange Bitvo for an undisclosed amount.
In the midst of a crypto exchange industry layoff crisis, FTX announced in early June that it would not be cutting jobs. On June 6, Bankman-Fried tweeted that his firm intended to “keep growing” for the time being.