FTX crypto exchange owned by Sam Bankman-Fried is exploring whether it can buy Robinhood Markets Inc. or not, according to people with information on the matter.
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One of the people asking not to be identified as the matter is private said that FTX is internally weighing options on how to buy app-based Brokerage. According to another person, Robinhood Markets Inc. has not received any formal takeover approach from FTX. It has not made any final decision, and they could opt out against pursuing the acquisition deal.
In an emailed statement on Monday, Bankman-Fried said that they were excited about the business prospects of Robinhood and the potential options where FTX could partner with them. However, there has been no active Merger and Acquisition discussion with the Menlo Park, California-based Robinhood Market Inc.
A spokesman for Robinhood declined to comment.
Co-founders of Robinhood, Vlad Tenev, Chief Executive Officer, and Baiju Bhatt, Chief Creative Officer, both control voting power in excess of 50% of the voting power in Robinhood as per information in the regulatory filing. Bankman- Fried disclosed last month that he had bought a 7.6% stake in Robinhood through Emergent Fidelity Technologies. He shelled out $648 million of the shares.
Robinhood lost nearly three-fourths of its market value since it came out with its Initial Public Offering in July last year. Following a Bloomberg report on the acquisition prospects, the stock surged, resulting in the trading being paused. The shares climbed 14% to close at $9.12 on Monday. This lifted the market capitalization to nearly $8 billion.
The M&A deal will combine the two companies that rose to prominence during the pandemic when trading boomed. They struggled after that with sharp declines in the crypto and equity market. If the M&A deal goes through, it will mark the end of a dramatic transformation for Robinhood, which has been a popular trading platform for new investors with around 22.8 million accounts.
Robinhood trading platform offered commission-free transactions for people who had modest account balances and entered the financial market in the early days of the Covid-19 pandemic lockdown. Enthusiasm for meme digital tokens like Dogecoin and meme stocks such as GameStop Corp fueled its rise among investors.
Since its launch of the IPO, Robinhood has struggled to keep its momentum, with revenues and active users declining sharply. FTX, on the other hand, was scouting for lucrative deals. It purchased Embed Financial Technologies earlier in June, giving FTX, which is one of the largest crypto exchanges in the world, to get a toe-hold in the US stock trading and clearing. In May, FTX announced that it was starting to roll out its US equity trading platform.
According to Bloomberg Billionaires Index, Bankman-Fried is one of the wealthiest people in Crypto, with a net worth of almost $10 billion.
