Sam Bankman-Fried, the billionaire founder of cryptocurrency exchange FTX, has amassed a 7.6 per cent stake in online retail brokerage Robinhood, calling it an “attractive investment”.
Bankman-Fried said in a securities filing he has no “intention of taking any action toward changing or influencing the control of [Robinhood]” and bought the stake purely as an investment. However, I have left open the possibility of calling for the company to consider “strategic alternatives or operational or management initiatives”.
Shares in Robinhood rose 25 per cent in after-hours trading following the announcement.
Bankman-Fried purchased $648mn in Robinhood shares at an average price of $11.52. The purchases disclosed by Bankman-Fried began in mid-March and continued through Wednesday, when he purchased $27.5mn in shares, according to a regulatory filing.
Robinhood went public last July in a hotly anticipated debut. But shares in the brokerage have stuttered as retail enthusiasm for stock trading has faltered in recent months. Shares in the broker had fallen more than 70 per cent since then, ahead of Thursday’s disclosure.
The investment points to the massive wealth Bankman-Fried, a former Jane Street trader, have accumulated during the most recent run-up in cryptocurrencies. Forbes estimates the 30-year-old FTX founder’s net worth is $21bn, even after this week’s sell-off in digital assets.
Bankman-Fried purchased the Robinhood shares through Emergent Fidelity Technologies, an investment vehicle he controls.
He is a vocal proponent of effective altruism, a philosophical movement centered on doing as much good as possible with a person’s resources.
FTX, which investors have valued at $32bn, has also waded into Robinhood’s core business. The company’s US arm opened a wait-list for a new stock trading platform in February, and one of its top executives recently previewed the function on Twitter.
Robinhood has pushed heavily into cryptocurrencies as revenue from equity trading has tumbled, launching crypto wallets on its platform and adding new currencies, bringing it more in line with competitors such as Coinbase. It plans to expand internationally as a crypto brokerage, and purchased the UK crypto company Ziglu in April.
Retail trading has fallen to pre-coronavirus pandemic levels in recent weeks, as a market sell-off and rising inflation have soured investor enthusiasm for stock trading. Robinhood missed its first-quarter revenue targets after reporting a 73 per cent decline in stock trading from the previous year. Its cryptocurrency trading revenue dropped 39 per cent.
Bankman-Fried has spoken about the strength of the broker’s brand: “Robinhood barely even needs to advertise; their name conveys their brand and message without the need for any additional colour,” he wrote on Twitter.
He has also been critical of the broker, particularly Robinhood’s decision to halt trading in certain equities at the height of the meme-stock trading frenzy. The company was later called before the House financial services committee to explain the incident.
“I don’t think Robinhood did something evil,” Bankman-Fried tweeted. “I think they did something incompetent: they weren’t prepared for heavy usage.”