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Robinhood shares surge amid FTX acquisition report

Robinhood Markets spiked higher on Monday before halting on the Nasdaq amid a report that the FTX cryptocurrency intends to buy the brokerage firm. 

According to Bloomberg, Sam Bankman-Fried, the founder of FTX, has shown interest in purchasing the California-based company. 

The brokerage firm had been trading its shares firmly higher for the better part of Monday after Goldman Sachs analysts lifted the rating of the firm from “sell” to “neutral,” noting that balance sheet cash, client payables, bank sweeps, and margin loans generated revenues could benefit from incremental rate hikes. 

Robinhood shares shot 15.7% higher before the trading halt, where a single share cost $9.26, a move that would leave the stock down with a market value of only $8 billion. 

Last year, Robinhood froze access to specific customers and reported that due to the lower equity and cryptocurrency trading volumes, the quarter revenues would be lower than $340 million. 

Robinhood lost over 2 million active users in a year

The Street reports that Robinhood had a $392 million net loss on revenues of $299 million in the first three months of 2022. 

The loss was attributed to the company losing 10% of the monthly active users and compensation expenses eating up the revenue since the beginning of the year. 

The company recorded a decline of active users from 17.7 million to 15.9 million in just a year. 

“For most of our history, Robinhood has operated in a period of low-interest rates, low inflation, and rising markets,” CEO Vlad Tenev revealed to the investors. 

“Our customers are now experiencing all three of these trends going in the opposite direction, perhaps for the first time in their lives.”  

Shares at Robinhood have been struggling amid their wider market selloff in the first half of 2022, dropping by over 50%. 

The company has also been struggling with trading revenues and declining user growth, putting the investors between a rock and a hard place. 

Before the steady decline to nearly $10, the shares were trading at a record high of $85 per share in August 2021. 

The price of Bitcoin dropped below $20,000 in June, triggering a massive selloff as investors moved to other safer bets amid the high inflation and rising rates. Crypto firms are either announcing layoffs or halting sales. 

Experts believe that’s the primary reason Bankman-Fried is seeking to purchase Robinhood. The billionaire is offering $20.6 billion for the company. 

The FTX owner launched the company in 2019 and is one of the most successful people in crypto. 

Last month, Bankman-Fried bought a 7.6% stake worth $648 million in Robinhood, according to a Securities and Exchange Commission filing which also stated that the FTX CEO believed that the shares “represented an attractive investment.” 

FTX is among largest crypto exchanges globally, offering derivatives products and spot trading. The company does not operate in the US but has become a significant rival to Binance and Coinbase. 

FTX has also signed deals with small players like BlockFi to bail them out during these tough economic times. Will the acquisition of Robinhood activate another stock surge and bring the company back to its glory days? Only time will tell. 

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  • Zahari Rangelov

    Zahari Rangelov is an experienced professional Forex trader and trading mentor with knowledge in technical and fundamental analysis, medium-term trading strategies, risk management and diversification. He has been involved in the foreign exchange markets since 2005, when he opened his first live account in 2007. Currently, Zahari is the Head of Sales & Business Development at TraderFactor's London branch. He provides lectures during webinars and seminars for traders on topics such as; Psychology of market participants’ moods, Investments & speculation with different financial instruments and Automated Expert Advisors & signal providers. Zahari’s success lies in his application of research-backed techniques and practices that have helped him become a successful forex trader, a mentor to many traders, and a respected authority figure within the trading community.

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