FTX Buyout Chatter Drives Robinhood Market (HOOD) Shares Up 14%

Key Insights:

• On Monday, news hit the wires of crypto exchange FTX exploring a buyout of Robinhood Markets (HOOD).

• While numerous exchanges have been forced into staffing cuts and more to manage fees, cash-rich platforms are in buyout mode.

• The market reaction to the news was positive, with Robinhoods share price jumping by 14%, while the NASDAQ 100 slipped by 0.74%.

The crypto winter has taken its toll on numerous crypto-related companies. Some of the largest crypto platforms have cut headcounts and started exploring other avenues to cut expenses, including marketing costs.

In some instances, the extended crypto winter has led to defaults, with talk of bankruptcies hitting the news.

Last week, TSX-listed Voyager Digital (VOYG) saw its shares tumble by 52.5% on news of a possible Three Arrows Capital loan default. There is no smoke without fire, with the news wires reporting of the crypto hedge fund defaulting on Monday.

Celsius Network is another victim of market conditions, with the platform having to freeze withdrawals earlier this month. The DeFi lender cited “Extreme market conditions” as the reason behind the freeze.

However, amidst the doom and gloom, several cash-rich names see the extreme market conditions as a buying opportunity.

FTX Holds Internal Talks on a Possible Robinhood Markets Buyout

On Monday, Bloomberg reported crypto exchange FTX is considering the possible acquisition of Robinhood Markets (HOOD).

According to the Bloomberg report,

“Sam Bankman-Frieds FTX crypto exchange is exploring whether it might be able to acquire Robinhood Markets Inc., according to people with knowledge of the matter.”

The report went on to say,

“FTX is deliberating internally how to buy the app-based brokerage.”

According to the report, FTX has not approached Robinhood with a formal offer and could decide against a takeover bid.

FTX founder and CEO Bankman-Fried reportedly said in an email statement,

“We are excited about Robinhoods business prospects and potential ways we could partner with them.”

The statement went on to say,

“That being said, there are no active M&A conversations with Robinhood.”

Investor Sensitivity to Crypto News Spills into the Equity Markets

Market reaction to the possible FTX buyout of Robinhood was upbeat.

On Monday, NASDAQ-listed Robinhood rallied by 14% to end the day at $9.12 per share. By contrast, the NASDAQ 100 ended the day with a 0.72% loss.

For June, Robinhood was down 20% to a Friday close of $8.00 per share and down 56% year-to-date. Mondays breakout session may have reduced the deficit but is unlikely to deter FTX from further exploring Robinhood as a target.

While Robinhood benefitted from the talk of an FTX buyout, Coinbase (COIN) took a hit.

On Monday, FX Empire reported Goldman Sachs (GS) downgrading Coinbase to a sell rating.

According to the report, the decision to downgrade came in response to the stock price falling by more than 75% this year.

Coinbase shares slumped by 10.76% in response to the downgrade. To Fridays close, Coinbase was down 30% for the current month and 78% year-to-date.

Bitcoin (BTC) has outperformed Coinbase despite the crypto winter. Year-to-date, BTC was down 54% June 24.

With buyout talks and downgrades hitting the US markets, more crypto-related firms are likely to become buyout targets.

Last week, Binance CEO CZ told Yahoo! Finance that Binance is looking at 50 to 100 deals.