Robinhood Markets Inc.’s turnaround efforts are more likely to grate up in opposition to the implosion of crypto trade FTX and the broader cryptocurrency market, one analyst mentioned late Monday, shortly earlier than the U.S. charged FTX founder Sam Bankman-Fried with multiple counts of fraud.
That analyst, Citigroup’s Christopher Allen, downgraded Robinhood
to impartial from purchase and lowered the value goal on shares of the favored stock-trading app to $10 from $11. Shares of Robinhood have been down round 2.4% on Tuesday.
Allen mentioned Robinhood had lower prices and made its platform extra engaging to lively merchants. But he mentioned uncertainty surrounding the inventory market subsequent 12 months, in addition to the cratering of the crypto market, made for a “mixed outlook” on the corporate.
Allen mentioned that following final 12 months’s meme-stocks frenzy, buying and selling exercise on Robinhood has cooled. He mentioned “a sustained move higher in equity markets” — one thing that’s removed from assured subsequent 12 months — can be wanted to spur stronger buying and selling exercise.
While inventory buying and selling on Robinhood has been secure in latest months, the analyst mentioned he anticipated Robinhood’s crypto-trading income to drop at the least 50% for each this 12 months and subsequent 12 months. And he mentioned the shockwaves from FTX’s collapse might ripple via to Robinhood in a wide range of methods.
One, he mentioned, was the potential liquidation of the 56.3 million Robinhood shares — or 7.4% of its excellent inventory — owned by Bankman-Fried, FTX’s founder and former chief government, via Emergent Fidelity Technologies. The timing of that liquidation, Allen mentioned, was not but clear.
Allen mentioned the scrutiny of FTX additionally eliminated it as a possible purchaser of Robinhood. And the fallout raised the potential for decrease buying and selling revenues for Robinhood’s crypto section, “given substantial price declines and material deterioration in investor confidence.”
Analysts have supplied related assessments for crypto trade Coinbase Global Inc.
Bank of America, in a note last month, mentioned that whereas Coinbase
was unlikely to be “another FTX,” it nonetheless confronted “a number of new headwinds over the near/medium term due to the recent collapse of rival crypto exchange FTX.” Needham analyst John Todaro additionally mentioned Coinbase wasn’t resistant to doable “contagion” from FTX’s downfall, whereas noting it had “little direct exposure” to FTX.
Bankman-Fried was arrested within the Bahamas on Monday. On Tuesday, the U.S. legal professional’s workplace of the Southern District of New York charged him with wire fraud in opposition to prospects and lenders, commodities and securities fraud, cash laundering, and defrauding the U.S.
The Securities and Exchange Commission on Tuesday also charged Bankman-Fried with defrauding investors, accusing him of steering FTX customers’ cash to Alameda Research — a buying and selling agency he co-founded in 2017 — and attempting to hide the diversion of the funds.
FTX, launched in 2019 and primarily based within the Bahamas, filed for chapter safety final month after revelations from the crypto information web site Coindesk about Alameda’s shaky finances — and the diploma to which it was intertwined with FTX — prompted a run on the trade. Binance, a big rival crypto-trading platform, opted to not transfer ahead with a bailout of FTX.
Robinhood inventory has fallen 47% thus far this 12 months, and Coinbase has tumbled 84%. In comparability, the S&P 500
is down 16% over that point.