FTX exploring a deal to buy Robinhood: Bloomberg report

Market Trading EssentialsJune 27, 2022

2 minutes read

The cryptocurrency exchange FTX is reportedly considering a deal to acquire digital trading platform Robinhood (HOOD), Bloomberg reported Monday, citing unnamed people familiar with the deal.

Robinhood has not yet received a formal notice from FTX of any such takeover, the report said, while adding that FTX could ultimately choose not to pursue a purchase.

The report of a potential acquisition by FTX comes just over a month after Sam Bankman-Fried, the CEO and founder of FTX, disclosed a 7.6% stake in Robinhood, paying $648 million at the time. As of Monday’s close, this position was worth closer to $513 million.

In a statement to Yahoo Finance following this report, Bankman-Fried said: “We are excited about Robinhood’s business prospects and potential ways we could partner with them, and I have always been impressed by the business that Vlad and his team have built. That being said there are no active M&A conversations with Robinhood.”

Robinhood gained 14% on Monday following Bloomberg’s report, triggering at least one trading halt for volatility in the stock. Shares of Robinhood had tumbled by more than 55% for the year-to-date through Friday’s close.

Bloomberg’s report comes just hours after analysts at Goldman Sachs upgraded shares of Robinhood to Neutral from Sell. Goldman put a $9.50 price target on shares while saying “we now see a more balanced risk-reward” for Robinhood.

In recent days, Bankman-Fried’s companies — FTX and Alameda Research — have offered loans to crypto firms in rough financial straits, with some likening his actions to those of Warren Buffett’s during the Financial Crisis.

Bankman-Fried’s crypto exchange FTX offered crypto lender BlockFi a $250 million line of credit. Meanwhile, the 30-year old billionaire’s trading firm, Alameda Research, has given Canadian crypto exchange Voyager a total line of credit in cash and crypto equal to more than $500 million.

Similar to what Binance’s founder, Changpeng Zhao, told Yahoo Finance, Bankman-Fried’s actions could be interpreted both as a profit-making opportunity and a way to squash contagion in a sector where firms remain deeply intertwined in their financial dealings.

Crypto transaction volume on Robinhood’s platform peaked at $233 million in the second quarter of last year; these revenues were down 76% to $54 million as of the company’s most recent quarterly results.

From its peak for the same period, the total crypto market has fallen by 62% according to Coinmarketcap, from $2.5 trillion to $936 billion as of Monday afternoon.