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Why Shares of Robinhood Are Surging Today

By Bram Berkowitz - May 13, 2022 at 12:58PM

Key Points

  • Sam Bankman-Fried has taken a 7.6% stake in Robinhood.

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The company disclosed in a filing that the CEO of the large crypto exchange FTX has taken a big stake in Robinhood.

What happened

Shares of the commission-free online brokerage Robinhood Markets (HOOD -5.43%) had jumped nearly 25% as of 12:27 p.m. ET today after a regulatory filing disclosed that Sam Bankman-Fried, the CEO of the cryptocurrency exchange FTX, has taken a 7.6% stake in the company.

So what

In a Securities and Exchange Commission (SEC) filing, the name of the reporting party is Emergent Fidelity Technologies, a company in which Bankman-Fried is the majority owner. The stake makes Bankman-Fried the third-largest shareholder of Robinhood.

Green line with arrow moving up and right.

Image source: Getty Images.

According to the filing, Bankman-Fried believes Robinhood is an "attractive investment" and does "not currently have any intention of taking any action toward changing or influencing the control of the Issuer." The filing also states that Bankman-Fried may look to enhance shareholder value through "operational or management initiatives" or "various strategic alternatives," although currently has no plans to do so. 

In other news, Citigroup analyst Jason Bazinet wrote in a research note yesterday that "given the drop in HOOD's equity value, we would not be surprised if the company garnered takeover interest." He believes the company could be purchased for about $15 per share, which implies substantial upside from Robinhood's current share price of $10.68.

Now what

Robinhood has struggled a lot this year as the company has continued to see a decline in monthly active users. Furthermore, the company recently cut about 9% of its workforce.

But the brokerage has benefited from crypto trading, especially last year when meme tokens like Dogecoin and Shiba Inu took off, so the fact that the CEO of one of the largest crypto exchanges in the world is investing is certainly interesting. Perhaps Bankman-Fried will have some kind of takeover interest in the future, but at least for now, he should be able to help Robinhood as it expands its crypto offerings.

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