David Trainer, The New Constructs CEO recently became a part of Yahoo Finance Live to analyse crypto executive Sam Backman-Fried’s FTX platform approaching a deal with Robinhood. Also with the business model of crypto exchange platform and comparisons to the dot-com bubble.
Following a Bloomberg report that highlights that Sam Backman-Fried is exploring what it takes to acquire Robinhood, the Nasdaq listed exchange shares are closing quite higher. Bankman-Fried is among the top shareholders of the brokerage with 7.6% stake.
When asked if it’s a surprise to see Bankman-Fried stepping out once they already witness FTX also being a lender for other crypto exchanges. Trainer highlighted that he is not surprised. FTX is attempting to save itself by bringing up these zombie businesses. And that Robinhood is a cash burning machine with no competitive benefit. They were negative on it since the IPO.
When Dave Griggs asked why they were propping it up at this point of time. He highlighted that if it goes to zero, it can have a contagion impact which brings down crypto and all other meme stock which FTX is into. And that till they think they can keep the appearances up and the narrative continues in the correct direction, they believe they can go on with fooling the investors into not sending many of these stocks to zero.
When Trainer was asked what he likes to see in Robinhood’s focus to change his mind. He signifies that they should give them a plan on how they may make money. And rather than just chasing more users, they should aim to generate money. Their money is burning up fast.
He sees danger here, the yields that the entities are vowing are unrealistic and uneconomic. And he thinks it is a sucker’s play, a lot of crypto is that. Crypto is not the only benefit of blockchain, it is one of many manifestations. It is going to a major learning stage many investors have to go through that everything that asserts to be related to blockchain tech is not essentially good.
Seana smith asked him what if the deal does not match the expectation and Robinhood is still left out. He opined that as he says it is a zombie business running short of capital. If they don’t get saved by FTX, maybe a Wall Street firm lends them some money, otherwise they go bankrupt. And that he wouldn;t lend money to an entity who can’t pay.
Source: https://www.thecoinrepublic.com/2022/06/29/new-constructs-ceo-expresses-himself-on-robinhood-crypto-is-suckers-play/