Why FTX will likely Acquire Robinhood

Crypto winter will fuel massive consolidation in apps and NFT platforms.

Hey Guys,

Today Coinbase was downgraded and we learned that Robinhood be in talks with FTX to get acquired. So why does this all make sense?

On May 12th, 2022 CEO of Coinbase rival FTX, Sam Bankman-Fried, disclosed that he had purchased 56,273,469 shares in Robinhood, representing around 7.6% of common stock in the company.

This is his own Elon Musk-esque move on cash poor Robinhood. One thing Binance and FTX are not, is cash poor. I’ve mentioned how I see them as the duopoly of crypto trading for years to come.

The reality is Crypto exchange FTX has been quietly shopping for brokerage start-ups amid move into stock trading. Robinhood’s considerable crypto friendly user-base might be the perfect opportunity.

FTX is directly competing with Robinhood, Cash App, and Public.com by offering both stock and crypto trading. Companies that know how to leverage Bitcoin bull mania stand a lot to gain like Block has, but FTX are also diversifying their business model. A crypto, investing and sports better super-app is more than likely in the consolidation that will take place in the space in just the next few years.

The stakes are high and FTX gets that. SBF plans to make some meaty acquisitions. Robinhood would certainly fall in that category.

Robinhood Markets Inc. has for months tried and failed to find ways to win investor approval. With SBF’s stake in Robinhood, it is in the dust bin of acquistion targets just as Peloton is. The FR reported earlier this Spring, that even institutions like Goldman Sachs or Fidelity are eying a Robinhood acquisition as well, then we may see several factions jockeying for a takeover.

The Financial Revolutionist is on to something: Interestingly—and prudently—FTX is rejecting a payment-for-order-flow (PFOF) model for stock trades due to the practice’s potential ban by the SEC. FTX may have opted for a non-PFOF model to both dodge regulatory oversight as well as prepare for an infrastructural overhaul within Robinhood if FTX acquires it.

This makes a lot of sense to me.

FTX has approached at least three stock trading start-ups about an acquisition, according to sources familiar with those discussions. According to Bloomberg and Reuters. WeBull is also an excellent product imho.

Robinhood’s stock is up 14% so far today on this speculation of an FTX takeover.

“With the launch of FTX Stocks, we have created a single integrated platform for retail investors to easily trade crypto, NFTs, and traditional stock offerings through a transparent and intuitive user interface,” Brett Harrison, the US president of FTX said in a statement back in May, 2022.

After NFTs, Stocks and crypto, the natural segment to acquire would be a share of the lucrative sports betting market, and then continue to pivot into entertainment like MMA or Roku-esque Ad-Tech. But when new Tycoons are building empires, the sure and steady approach is best.

Robinhood’s user base is similar enough to FTX that it makes a lot of sense. Robinhood is still smaller as an app than many would assume. Monthly Active Users (MAU) increased 48% to 17.3 million for December 2021, compared with 11.7 million for December 2020. With a market cap of around $8 Billion, it’s not crazy to imagine. The stock price is down though 50% YTD and could dip much further.

Sam Bankman-Fried, the 30-year-old chief executive officer of crypto trading platform FTX has a lot of options, he could go and buy some NFT platforms as well in the heart of the crypto winter. There’s nothing really stopping him.

Bloomberg talked to a lot of sources today. FTX is deliberating internally how to buy the app-based brokerage, one of the people said, asking not to be identified because the matter isn’t public. Robinhood hasn’t 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.

The crypto winter will mean a lot of consolidation and more centralization in the Web3 space, in spite years of propaganda insisting that this is a huge move towards decentralization.

How hard would it to be for a Web3 players to create the crypto trading, stock trading and sports gambling super-app? Not so difficult to be honest.

Thanks for reading!