coinedition.com
After the news of the leading cryptocurrency exchange platform Binance purchasing rival company FTX due to a liquidity crunch broke out, the stock prices of the trading platform, Robinhood have fallen by 20%.
While Robinhood stocks opened trading at $11.72, the figure transformed into $9.74, once the news of the acquisition broke out.
Robinhood $HOOD closed down 19% today.
— Benzinga (@Benzinga) November 8, 2022
FTX CEO Sam Bankman-Fried has 56,273,469 shares in $HOOD
There's speculation that Bankman-Fried will have to sell some or all of the 7.6% stake to shore up some personal liquidity.
What are your thoughts?
FTX founder, Sam Bankman-Fried bought a 7.6% stake in Robinhood, back in May 2022. As per a US Securities and Exchange Commission filing, Bankman-Fried purchased 56 million shares of the popular trading app Robinhood, worth around $600 million, via Emergent Fidelity Technologies.
Certainly, the big purchase raised eyebrows and people said that Bankman-Fried had plans to buy Robinhood outright; he clarified that he doesn’t intend to influence Robinhood’s direction while stating the stake “represents an attractive investment.”
Robinhood’s Twitter account supported Bankman-Fried’s claim by sharing “Of course we think it is an attractive investment too.” At the time, Robinhood’s HOOD hiked by 14%, jumping to $9.12.
Upon the news of FTX’s acquisition by Binance, investors reacted rather negatively. According to a report by Mizuho Securities USA analyst and managing director, Dan Dolev:
While the knee-jerk reaction is negative amid Sam Bankman-Fried’s ~8% stake, Robinhood’s exposure to crypto is small as the business remains diversified.
Dolev also mentioned that investors may question the future of Sam Bankman-Fried. He further argued that Robinhood only generates nearly 14% of its revenue by trading cryptocurrency tokens.
Currently, there are speculations about Bankman-Fried selling some part or the entirety of his HOOD stake. However, experts insist that the crisis is temporary.