One of the biggest names in the crypt is the bullish-minded Robinhood HOOD 24.88%
Markets. It makes sense. But others may think well before settling in Sherwood Forest.
Thursday’s revelation that Sam Bankman-Fried, a 30-year-old billionaire who founded the cryptocurrency exchange FTX, bought a 7.6% stake in Robinhood, led to an increase in shares of the online brokerage company by almost 25% on Friday. Of course, stocks are still down about 40% this year and almost 90% from their peak price.
Some traders may think this is a prelude to an Ilona Mask-style takeover or even a merger or alliance with FTX. However, all modern indications are that this is a personal and passive investment by Mr. Bankman-Fried.
The nature of the application does not preclude an active role, but it says that currently Mr. Bankman-Fried does not intend to be active and sees this as an “attractive investment”. Robinhood also has a special share class for its co-founders that gives them a voice over the company, making an aggressive takeover a difficult proposition.
For many observers Crypto may be in a time of crisis, but for industry leaders and believers it is time, as Warren Buffett said, to be greedy when others are afraid.
Not many people – other than Mr. Buffett – may be able to earn 20% plus earnings per day through a seal of approval on the stock. But when it comes to the crypt, Mr. Bankman-Fried’s mascot obviously has a market reputation.
Robinhood currently trades at a market value of about $ 9 billion, but has cash and equivalent resources of about $ 6 billion, not counting the cash set aside for customers and their deposits at settlement centers. So if you’re set up for the future of crypto, Robinhood can look pretty appealing.
It is licensed to offer crypto-trading in New York – which the FTX US does not currently do, although it has recently applied to the New York Trust – and it is a place where many people who don’t normally invest can go to get started trade crypto for the first time. He fully deployed his crypto-wallet. Robinhood has also recently more than doubled the discount rate it receives from sending crypto orders to trading platforms.
Despite this, revenues from crypto transactions grew by only 13% consecutively in the first quarter due to a sharp drop in activity levels. However, this suggests that any rebound in crypto-trading or pricing can be quite lucrative for Robinhood.
However, for the cryptosceptic investor, Robinhood’s road ahead still looks long. The company needs to increase its average revenue per user – $ 53 as of the first quarter – by about $ 30 to help generate positive earnings before the end of the year before interest, taxes, depreciation and amortization. The ability of inactive trading, non-crypto products to stimulate this expansion remains questionable, although things like an expanded stock lending program and a jump in customers ’cash levels promise.
In these difficult times for the crypt, it may be wise for believers to choose a leader to follow, especially if they have a long time horizon. But if you don’t expect a rebound any time soon, judging Robinhood by other dimensions remains a challenge.
Recently, markets are looking more volatile: stocks, bonds and cryptos are falling as investors struggle to cope with the large fluctuations that are troubling financial markets around the world. Caitlin McCabe of the WSJ examines some of the reasons for the recent market frenzy. Photo: Spencer Platt / Getty Images
Write Telis Demo at telis.demos@wsj.com
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