Robinhood Deal Would Give FTX Key Superapp Piece

When news broke that cryptocurrency billionaire Sam Bankman-Fried was looking into buying Robinhood, shares of the crypto and stock brokerage did something they haven’t done very much in the past year: They jumped. A lot.

HOOD shares jumped so much and so fast — 12%, according to Bloomberg — that trading was briefly halted.

What’s remarkable isn’t that Robinhood’s shares jumped as high as they did. For one thing, they’ve been tumbling for a long time, having topped out above $70 last August.

For another, the potential buyer was FTX cryptocurrency exchange CEO Bankman-Fried, one of the richest people in crypto and as of late the most important.

Between backstopping teetering crypto firms BlockFi and Voyager Digital with lines of credit totaling $750 million last week, naming the NBA’s Miami Heat arena after FTX, and promising $100 million in political donations for the 2024 presidential race — an amount so large it was eye-opening even in Washington  — Bankman-Fried is rapidly making himself and his explosion of hair the face of crypto.


Also read: Crypto Industry Lobby Punching Above Its Weight Class

In much the same way the clean-domed Coinbase CEO Brian Armstrong has been since taking the company public in April 2021.

But while Armstrong became widely known after listing his now overextended and retrenching crypto exchange on Nasdaq, Bankman-Fried is doing it by acting as crypto’s answer to J. Pierpont Morgan — who backstopped banks during the bank panic of 1907 — as crypto winter sets weaker firms trembling.

Rescuing Robinhood

Bankman-Fried already owns 7.6% of Robinhood, and with Bloomberg reporting that its market capitalization dropped below its cash-on-hand as of June 15, it’s hard not to see the firm as a potential bargain.

On the one hand, its active user numbers are down 39% year-over-year in May, and its brand damaged when it got caught up in the WallStreetBets GameStop fiasco, when it was accused by everyone from reporters to members of Congress of favoring a big hedge fund client at the expense of retail buyers.

Read more: Robinhood Confronting Over 30 Civil Lawsuits For Curbing Trading

On the other hand, it still has 15.9 million active users, which would be a big boost for FTX, which only recently began outpacing Coinbase on daily trading volume. And it’s already mixed crypto and stock trading, something FTX aims to do.

The firm launched FTX Stocks in beta last month

“The U.S. has the largest retail base in the world and you don’t want to have to split into two different apps to trade two different asset classes,” FTX President Brett Harrison said at the time. “This is not a revenue-generating model for us, it’s more of a user-acquisition strategy.”

See also: Sam Bankman-Fried’s FTX Aims to Become the ‘Everything App’

“We would like to become the ‘everything exchange’ and the ‘everything app’ when it comes to financial services and FinTech in general,” Harrison added.

As for Robinhood, it’s worth noting that co-founders Vlad Tenev, the president and CEO, and Baiju Bhatt, the chief creative officer, control more than half of the firm’s voting power.

“We are excited about Robinhood’s business prospects and potential ways we could partner with them,” Bankman-Fried told Bloomberg around 4 p.m. “That being said, there are no active M&A conversations with Robinhood.”

Saving and Enriching

Bankman-Fried has positioned himself as a potential savior of crypto firms, saying, “We have a responsibility to seriously consider stepping in, even if it is at a loss to ourselves. Even if we weren’t the ones who caused it, or weren’t involved in it. I think that’s what’s healthy for the ecosystem, and I want to do what I can help it grow and thrive.”

See here: Is Crypto’s Richest Billionaire Becoming Its ‘Lender of Last Resort?’

That said, he isn’t exactly being altruistic. Over the weekend, BlockFi investors revealed that the terms of the line of credit FTX gave them would let it buy the company “at essentially zero price,” one investor said.

And Bankman-Fried is now the largest single shareholder of Voyager Digital, owning more than 11% of the company. He also owned 8.4% of Bitwise Crypto Index Fund at the beginning of the year.

Back in 2020, the firm acquired Blockfolio, a crypto portfolio tracking app, to help grow its user base, and late last year acquired future exchange LedgerX, giving it licenses from U.S. regulators. And in April, FTX.US made a “sizable” investment in regulated equities exchange IEX, CoinDesk said.

“We’re doing that globally, in places like in Japan, Australia, in Dubai, different places where we’ve been able to either partner with local companies or sometimes do acquisitions to be able to get licenses that we need,” Harrison said.

 

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