Robinhood Plunges as Bankman-Fried’s FTX Sells Itself to Binance

(Bloomberg) — Robinhood Markets Inc. tumbled by the most in more than a year after Binance Holdings Ltd. agreed to acquire Sam Bankman-Fried’s troubled crypto exchange FTX.com, which had been considered a potential suitor for the trading platform.

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Shares of Robinhood plunged 19% Tuesday, their steepest decline since August 2021, after the founders of Binance and FTX.com announced that they have signed a non-binding letter of intent on the takeover to “help cover the liquidity crunch” at FTX.com.

Investors may have soured on Robinhood after the announcement as FTX was said to have been exploring a possible acquisition of the company, people with knowledge of the matter told Bloomberg News in June.

“While the knee-jerk reaction is negative amid Sam Bankman-Fried’s ~8% stake, Robinhood’s exposure to crypto is small as the business remains diversified,” Mizuho Securities USA analyst Dan Dolev wrote in a report.

Coinbase Global Inc. tumbled 11% to a four-month low on concerns that the Binance-FTX deal puts a spotlight on the challenges facing the $1 trillion crypto industry.

“The rapid fall from grace of a crypto exchange demonstrates how fickle the crypto industry could be,” Dolev wrote. “This is a red flag for Coinbase, where the vast majority of revenues are from trading crypto tokens with little diversification elsewhere.”

Other cryptocurrency-linked stocks slipped Tuesday as Bitcoin fell as much as 17% to touch the lowest since November 2020 amid investor jitters. MicroStrategy Inc. sank 21% and Riot Blockchain Inc. lost 7.3%, while Marathon Digital Holdings Inc. fell 5.1% and Silvergate Capital Corp. tumbled 23%.

–With assistance from Bailey Lipschultz.

(Updates share performance throughout.)