Robinhood plans buyback of Sam Bankman-Fried’s contested stock
ROBINHOOD Markets said it’s looking to repurchase shares previously controlled by Sam Bankman-Fried and cancelled almost US$500 million of stock-based compensation for its co-founders.
The online brokerage also reported a wider-than-expected loss for the fourth quarter as customers cut back on trading, according to a statement on Wednesday (Feb 8).
“Co-founder Baiju Bhatt and I announced today that we cancelled nearly US$500 million of our share-based compensation to ensure the company has as many resources as possible to deliver value to customers and shareholders,” Robinhood chief executive officer Vlad Tenev said in the statement. “We’re now starting to see meaningful traction on a number of the products we launched, which gives us confidence they can grow into significant business lines over time.”
Shares of the online brokerage rose 2.2 per cent to US$10.70 in extended trading at 4.25 pm in New York.
Net loss for the period was US$166 million, or 19 US cents a share. That’s more than the 11 US cent average estimate of analysts surveyed by Bloomberg. Revenue climbed 5 per cent from a year earlier to US$380 million, also short of the US$388.8 million predicted by Wall Street.
Crypto transaction revenue, once a key source of income, declined towards the end of 2022. The November implosion of Bankman-Fried’s FTX, previously one of the world’s largest crypto exchanges, rattled investors and triggered a plunge in Bitcoin and other digital assets. While Robinhood has been introducing new features, including retirement accounts and crypto wallets, it still earns roughly half of its revenue from trading.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
An entity controlled by Bankman-Fried acquired a stake of more than 7 per cent in Robinhood last year, and the brokerage’s board authorised the firm to “pursue purchasing most or all” of those shares, according to the statement.
Stock rebound
Robinhood’s stock, which surged 29 per cent this year through the close of regular trading Wednesday, is still down more than 70 per cent since the company’s July 2021 initial public offering.
After a pandemic-fuelled rally unleashed a stampede of everyday investors into stocks, options and digital currencies, Robinhood has struggled to recapture traders’ interest. Fourth-quarter crypto transaction revenue tumbled 24 per cent to US$39 million from the third quarter.
While the firm has posted losses totalling more than US$4.5 billion over the past two years, the bottom line has steadily improved since the third quarter of 2021 and its loss in the latest period was Robinhood’s smallest as a public company. The brokerage dismissed more than 1,000 employees last year.
One lingering threat to Robinhood’s business is a push by US regulators to change how trades from small investors are processed. A Securities and Exchange Commission proposal would disrupt the current system, in which big trading firms pay brokerages including Robinhood to execute their customers’ trades. Robinhood executives say the changes could upend a model that allows them to offer commission-free trades. BLOOMBERG
Share with us your feedback on BT's products and services
