FTX chief acquires 7.6% stake in Robinhood

The Emergent Fidelity Technologies, the firm linked to FTX chief Sam Bankman-Fried, has become the owner of a 7.6% stake in the online broker Robinhood. This follows from the Form 13D filing.

Robinhood’s shares rose as high as 28% in after-hours trading. The regular session closed up 5.03%.

The firm bought 56.28 million Robinhood shares for $648.29 million. The purchase price was $11.52 per share, implying upside of about 34.57%. Since the news was released, the market has largely priced in much of that upside.

Emergent Fidelity Technologies is registered in Antigua and Barbuda. Its sole director and owner is Bankman-Fried.

The document states that the buyer regards the deal as an ‘attractive investment’. It is described as a portfolio investment.

Since the start of the year, Robinhood’s shares have fallen 51.8%. Since the IPO, losses have reached 77.47%. From their all-time high, the stock has fallen 90.3%.

Robinhood’s app gained popularity during the pandemic and the surge in interest in Dogecoin. Trading of Dogecoin, the largest meme token, in the second quarter of 2021 generated over 40% of the company’s revenue.

Subsequent filings showed a decline in revenue from crypto trading and user activity. The first-quarter 2022 results were not an exception. Wall Street’s attitude toward Robinhood’s shares may also have been influenced by risks of revising SEC regulation or banning payment-for-order-flow. This practice accounts for a lion’s share of the company’s revenue.

Earlier, Robinhood’s CEO Vlad Tenev called cryptocurrencies the foundation of the company’s future development. In April 2022, the online broker expanded access to the beta of its cryptocurrency wallet to 2 million customers and announced plans to integrate the Lightning Network “in the coming months”.

In July 2021, Bankman-Fried did not rule out purchases by Goldman Sachs or CME Group in the future.

In January 2022, FTX raised $400 million at a valuation of $32 billion. In the same month, the exchange’s U.S. unit announced plans to include stock trading in its product lineup.

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