Robinhood M&A Interest, Stock Upgrade Explained

Hello and welcome to Protocol Fintech. This Tuesday: Robinhood under pressure, crypto contagion and Amount layoffs.

out of the chain

Fiat always has the advantage of helping Ukraine. The country is said to have collected some $135 million in donations of bitcoins and other tokens. But conventional transfers have been much larger, according to Ukrainian official Mykhailo Fedorov revealed Monday. Aid organizations using PayPal have raised $500 million, he reported in a tweet, since the money transfer service began operating in the country in mid-March.

—Owen Thomas (E-mail | Twitter)

Robinhood wobbles

Robinhood is reeling from a wave of good, bad and confusing news. It marked an upgrade from Goldman Sachs, which yesterday said the worst may be over for the company’s plummeting shares. But a recent congressional report suggested the crisis it faced during last year’s GameStop frenzy was worse than expected. Then there was the report that FTX was considering buying the company – which was quickly denied by FTX CEO Sam Bankman-Fried, who personally acquired a stake in the online brokerage this spring.

Robinhood had a near death experience. The GameStop fiasco may seem like ancient history, but a report from the House Financial Services Committee shed light on how Robinhood nearly imploded during the trading frenzy.

  • The January 2021 GameStop frenzy shone a spotlight on Robinhood’s “troublesome business practices, inadequate risk management, and a culture that values ​​growth over stability,” according to the House committee report.
  • In fact, things got so bad that Robinhood “was only saved from failing to meet its daily security deposit requirement by a discretionary and unexplained waiver,” the report said.
  • Robinhood played down the report. The results were “nothing new” and confirmed the company’s view that “January 2021 was an extraordinary, once-in-a-generation event that tested everyone in the market”, Robinhood assistant general counsel Lucas Moskowitz said in a statement.

What amounts to good news is that maybe things won’t get any worse. After downgrading Robinhood’s stock to sell in April, citing a “lack of clarity around the path to profitability,” Goldman Sachs upgraded it to neutral on Monday.

  • HOOD is already down 29% since the downgrade and shouldn’t fall any further for now. “We now see a more balanced risk-reward,” Goldman Sachs analysts told clients in a note.
  • Rising interest rates may actually help boost Robinhood’s net interest income, and customer engagement based on transaction volumes will likely level off. Analysts said they believe Robinhood “went through much of the high churn” it went through after the GameStop frenzy.
  • The report sent shares of Robinhood up 14%, although they are still below $10. Robinhood is not out of the woods yet, analysts said: “Fundamentals are still very weak.”
  • The company is also cheaper now, its market value has dropped to $8 billion. This is probably why Wall Street got excited when chattering that FTX was considering buying HOOD. Bankman-Fried shot down the report, saying there was “no active conversation about mergers and acquisitions”, although he was “impressed with the company that Vlad [Tenev] and his team have built.
  • If FTX wants to discuss buying Robinhood, Bankman-Fried is smart to butter Tenev. Robinhood’s CEO and co-founder Baiju Bhatt control 63.3% of the company’s voting power, thanks to its multi-class share structure.

What Tenev has built is a wobbly edifice, Rob Siegel of the Stanford Graduate School of Business said, noting that Robinhood’s revenue streams are under serious pressure. His “bread and butter” comes from day trading and crypto, which aren’t exactly robust markets right now: “Their core business is in big trouble.” Given this, the bar for good news is low.

—Benjamin Pimentel (E-mail | Twitter)

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Efficient by design: We wanted to understand how Stellar compares to other blockchains and the legacy financial system. But as we tried to gather information on what was publicly available, there was little to be found. Rigorously tested data and research from the blockchain and traditional financial industries as a whole are lacking and not easy to find.

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on the money

UK officials are investigating whether Wise CEO Kristo Käärmann failed to pay his taxes on time. Käärmann has already paid the taxes and penalties, but the Financial Conduct Authority is now looking into the matter, the company said.

Amount has laid off 18% of its staff. The company had about 400 employees before the cuts and raised $99 million last year, valuing it at more than $1 billion.

Celsius resists Chapter 11. Lawyers for the DeFi lender have recommended bankruptcy, but Celsius is asking its clients to enable something called “HODL Mode” on their accounts to show their support.

Hedge funds are shorting USDT. The Tether Stablecoin briefly lost its peg to the dollar in May. Some are betting against the USDT on issues regarding the quality of its reserves, while others see trading as a way to bet on the broader economy.

Crypto contagion

Crypto hedge fund Three Arrows Capital has defaulted on a $666 million cryptocurrency loan from Voyager Digital, the brokerage said on Monday.

Voyager Digital said it issued a notice of default to the hedge fund for defaulting on a 15,250 bitcoin, $350 million USDC loan. Voyager “intends to continue the recovery of [Three Arrows] and is in discussion with the company’s advisors about available legal remedies,” the company said in a statement.

“We are working diligently and quickly to strengthen our balance sheet and seek options so that we can continue to meet customer demands for liquidity,” Voyager CEO Stephen Ehrlich said in a statement.

Voyager stressed that it “continues to operate and fulfill customer orders and withdrawals,” noting that it has approximately $137 million in cash and “owns crypto assets.”

Read the rest of the story on Protocol.com.

-Benjamin Pimentel

Deal flow

FalconX, an institutional crypto exchange and market maker, hit a valuation of $8 billion after a $150 million Series D round. GIC and B Capital led the round. The company’s $210 million Series C round in August 2021 valued it at $3.75 billion.

Las Vegas-based financial infrastructure firm Prime Trust has closed a $107 million Series B funding round led by FIS, Fin Capital, Kraken Ventures and Mercato Partners. The company creates APIs and widgets for cryptocurrency exchanges, wallet providers, neobanks, and other companies managing digital assets.

UK neobank Starling Bank is acquiring a £500m mortgage portfolio from Masthaven as part of a shift in strategy to diversify lending. Most of the company’s assets are government-sponsored pandemic recovery loans, but that program is set to wind down at the end of June.

Ledger Investing raised $75 million in a Series B funding round led by WestCap. Teachers’ Venture Growth, Intact Ventures, Signalfire and MassMutual Ventures also participated in the round. The New York insurtech aims to link securities to insurance risk and says it will use the funds to build additional data infrastructure services.

Aidaly raised $8.5 million in a round led by Alexis Ohanian’s Seven Seven Six. Lightspeed Venture Partners, Operator Partners, Precursor Ventures and Polymath also invested. Aidaly offers financial and coaching services to family caregivers.

Outland raised $5 million in a seed round led by OKX Blockdream Ventures and with participation from JDAC Capital, IMO Ventures and Dragon Roark. The thriving startup fosters “critical conversation” around emerging digital technologies for selling and displaying art, and hired former Whitney Museum of Art curator Christopher Lew in March.

Earned salary access service Tapcheck has raised $20 million in a Series A round led by PeakSpan Capital. The Los Angeles startup helps employees leverage earned but unpaid wages and offers a variety of complementary financial wellness services.

CONTENT SPONSORED BY THE STELLAR DEVELOPMENT FOUNDATION

Efficient by design: SDF has an ongoing Carbon Dioxide Removal (CDR) commitment in place. Working with the Stellar ecosystem, we will pay for the removal of carbon emitted from the network annually and retroactively pay for the removal of the network’s historical carbon footprint since launch.

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Thanks for reading – see you tomorrow!

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