February 4, 2023

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Robinhood Could Be Next Victim Under FTX Collapse Stress – DailyCoin’s CitiGroup

© Reuters Robinhood could be next victim under FTX meltdown stress – CitiGroup

Retail-focused trading platform Robinhood (NASDAQ:) could become the next victim of the fast-spreading FTX contagion as CitiGroup downgrades HOOD to a neutral stance from a buy.

CitiGroup downgrades HOOD to Neutral

Robinhood, which entered crypto trading in 2018 amid the crypto bull run that began in late 2020, is witnessing how low the crypto market can sink, made worse by its exposure to the collapsed crypto exchange.

In a research report published on Tuesday, December 13, CitiGroup downgraded its Robinhood Markets (HOOD) rating to neutral from buy and lowered its price target to $10 from $11. HOOD is down 40% this year and more than 88% from its all-time high.

Is Robinhood facing a possible restructuring?

Robinhood’s troubles are centered on its exposure to FTX, as Bankman-Fried took a 7.6% stake in HOOD in May this year. CitiGroup also expects crypto uncertainty to weigh on the trading platform.

The claim that Robinhood will be the next victim is bolstered by CitiGroup’s prediction that Robinhood’s trading revenue will fall over 50% over the next year, after falling more than 50% in 2022.

However, Robinhood has released some positive data points. Robinhood did not report a significant drop in activity since the FTX collapse and had a net deposit of $1.7 billion as of November — an annualized growth rate of 28% compared to the AUC in October 2022.

On the flip side

Although CitiGroup’s report is mostly bearish, the bank notes that Robinhood has $7 net cash per share, which should support HOOD.

Why you should care

Robinhood’s published data points suggest the trading platform could weather the storm and avoid becoming the next company on FTX’s butcher list.

Bankman-Fried’s HOOD acquisition is covered in:

Robinhood up 20% as FTX boss buys 7.6% stake – Ark Invest buys $3 million worth of Coinbase (NASDAQ:) stock

The fight of Robinhood is covered below:

Robinhood CEO Vlad Tenev pleads guilty as the company cuts 23% of its workforce

See original on DailyCoin