What happened

Robinhood Markets (HOOD 2.50%) is reportedly a potential target for global crypto exchange FTX. The reports suggest no deal is imminent, but the deal talk caused Robinhood shares to spike 12% higher in the final hour of trading on Monday.

So what

Robinhood has been around less than a decade, but it has packed a lot of drama into that short existence. The stock-trading app caused a revolution in the industry due to its fee-free trading, causing most established brokerages to follow. It was also at the center of the so-called "meme stock" trading binge and has been in the regulatory crosshairs ever since.

As a stock, however, Robinhood has been decidedly less successful. The company went public last summer and immediately spiked about 100% but is now down about 75% from its debut.

The decline has led to speculation that Robinhood could be a takeover target, and on Monday Bloomberg backed up that speculation with a report that FTX, the crypto brokerage run by Sam Bankman-Fried, has held internal discussions about a potential bid. FTX has been pushing into equities to complement its crypto business; last week it announced plans to acquire equities-clearing start-up Embed Financial to enhance its FTX stocks platform.

According to the report, the discussions are preliminary, and FTX has not made a formal takeover approach. But there is some history between the two companies: Earlier this year Bankman-Fried took a 7.6% stake in Robinhood.

Now what

The deal talk is interesting, but investors should remain cautious. There is a long path to travel between internal deliberations and an actual completed deal -- and no guarantee FTX will actually make an offer.

Even if it does, the upside might be limited. FTX has been looking to opportunistically expand through this recent downturn and is likely interested in Robinhood in part because it believes it can get a bargain. Given the potential issues Robinhood faces as the Securities and Exchange Commission (SEC) examines its business and reconsiders rules that make commission-free trades viable, there is still a lot that can go wrong for the young brokerage company from here.