FTX-Robinhood Rumors: Piper Sandler Sees a 'Win-win' Situation, Others Less Optimistic

June 28, 2022 6:37 AM EDT
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Robinhood (NASDAQ: HOOD) shares are down roughly 4% in pre-market after FTX’s founder Sam Bankman-Fried said his crypto exchange is not in talks to acquire Robinhood Markets.

Robinhood shares closed 14% higher on Monday on a Bloomberg report that FTX is “seeking a path” to buy Robinhood. The report said FTX is discussing internally the possibility of acquiring Robinhood.

However, Bankman-Fried said that “there are no active M&A conversations with Robinhood.”

"We are excited about Robinhood's business prospects and potential ways we could partner with them."

The latest rumors come after SBF took a 7.6% stake in Robinhood in May.

Morgan Stanley analyst Michael Cyprys sees a wide valuation range for Robinhood shares, namely between $5 and $54 apiece.

“We think the market may increasingly ascribe strategic optionality to the share price… Opportunity to reset stock award trigger points could be a benefit from pursuing strategic alternatives, however business fundamentals continue to worsen while regulatory risks are coming into focus,” Cyprus told clients in a note.

Piper Sandler analyst Richard Repetto is more positive as he sees a “win-win” scenario for both companies.

“We believe an alliance or merger of the two companies could bring together two innovative companies with complementary business models. Still, while there is $6 billion in cash on HOOD's balance sheet, the biggest uncertainty appears to be the desire of HOOD's founders given their excess 10x voting rights,” Repetto told clients in a note.

Finally, JMP analyst Devin Ryan sides with Morgan Stanley’s Cyprys as he sees a “low probability” the deal could take place.

“We are not surprised that exploratory interest would exist in Robinhood, particularly following the material drop in its share price over the past year and we appreciate strategic rationale with FTX specifically. However, price and ownership dynamics could pose a challenge for FTX or other potential Robinhood suitors,” Ryan wrote.

“Conversations appear to be extremely preliminary, and while they could progress, we currently view a sale as a relatively low probability, and we believe a fire-sale price is off the table,” he concluded.

By Senad Karaahmetovic

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