Robinhood Merger With FTX Could Be 'Win-Win': Why This Analyst Is Bullish On M&A Rumors

Rumors of Robinhood Markets Inc HOOD being acquired by FTX sent shares soaring Monday. While FTX CEO and co-founder Sam Bankman-Fried put the rumors to rest for now, one analyst can’t help but think of the possibility of a merger.

The Robinhood Analyst: Piper Sandler analyst Richard Repetto has a Neutral rating on Robinhood and a price target of $11.

Related Link: Robinhood Q1 Earnings Highlights: EPS And Revenue Miss, Monthly Active Users Fall

The Analyst Takeaways: An alliance or merger between Robinhood and FTX could bring together two companies with complementary business models, Repetto said in a note on Robinhood.

“A strategic partnership between HOOD and FTX could be a win-win scenario,” Repetto noted.

The analyst points to Robinhood having early success and being disruptive in the online trading sector. The company’s zero commission trading has been adopted by others, taking away a disruptive edge it had.

“While HOOD has a strategy of diversification, cost control, and continued product innovation, current consensus estimates do not have it reaching profitability until 2025,” he continued.

For growth, Robinhood is looking towards cryptocurrency and international markets. Robinhood launched crypto wallets and added additional cryptocurrencies to its platform in the second quarter.

FTX is one of the largest cryptocurrency exchanges in the world and brings with it an international audience.

“FTX brings one of the largest, international spot and derivative crypto exchanges in the world and SBF’s innovation has potential to disrupt and disintermediate the futures clearing model of tomorrow,” the analyst said.

FTX is pushing into U.S. stock trading as one of its pillars of growth, a move that could increase its customer base and bring more people to its cryptocurrency platform.

“We believe HOOD’s culture of innovation and brokerage expertise, regulatory knowledge, and strong U.S. retail brand and presence could be highly desirable for FTX,” he noted.

Bankman-Fried acquired a 7.6% stake in Robinhood earlier this year, paying an average of $11.52 for Robinhood shares.

Aside from a merger or partnership with FTX, the analyst points to Robinhood having $6 billion of cash on its balance sheet.

One sticking point for a merger would be how the founders of Robinhood feel about a deal due to a dual-class share structure.

HOOD Price Action: Robinhood shares are down 2.80% to $8.87 on Tuesday at market close.

Photo: Sergei Elagin via Shutterstock