Bankman-Fried’s crypto exchange FTX seeking path to buy Robinhood

NEW YORK (BLOOMBERG) – Sam Bankman-Fried’s FTX crypto exchange is exploring whether it might be able to acquire Robinhood Markets, according to people with knowledge of the matter.

FTX is deliberating internally how to buy the app-based brokerage, one of the people said, asking not to be identified because the matter is not public.

Robinhood has not received a formal takeover approach from FTX, another person said. No final decision has been made and FTX could opt against pursuing a deal, the people said.

“We are excited about Robinhood’s business prospects and potential ways we could partner with them,” Bankman-Fried said on Monday (June 27) in an e-mailed statement. “That being said, there are no active M&A (merger and acquisition) conversations with Robinhood.”

A spokesman for Menlo Park, California-based Robinhood declined to comment.

Robinhood’s co-founders, chief executive officer Vlad Tenev and chief creative officer Baiju Bhatt, control more than 50 per cent of Robinhood’s voting power, according to a regulatory filing.

In May, Bankman-Fried disclosed that a company he controls, Emergent Fidelity Technologies, bought a 7.6 per cent stake in Robinhood.

Shares of Robinhood have lost about three-quarters of their value since the firm’s initial public offering (IPO) last July, leaving it with a market capitalisation of about US$7.4 billion (S$10.3 billion). The stock surged 12 per cent to US$8.96 at 2:59pm in New York, triggering a trading pause, following Bloomberg’s report.

A deal would combine two companies that vaulted to prominence during a pandemic-fuelled trading boom, only to struggle with sharp declines this year in equity and crypto markets. It would also mark the end of a period of dramatic transformation for Robinhood, a popular trading platform among fledgling investors, with 22.8 million accounts.

The brokerage popularised commission-free trading for people with modest account balances who piled into financial markets during the early days of Covid-19. Investor enthusiasm for meme stocks such as GameStop and digital tokens including Dogecoin fuelled its ascent.

Robinhood has struggled to maintain that momentum since the IPO, with active users and revenue plummeting.

FTX, meanwhile, has been on the hunt for deals. It acquired Embed Financial Technologies earlier this month, giving one of the world’s biggest crypto exchanges a foothold in US stock trading and clearing.

FTX announced it was beginning to roll out its own US equity trading platform in May. Bankman-Fried is one of the richest people in crypto, worth almost US$10 billion, according to the Bloomberg Billionaires Index.