In a major financial move, Robinhood Markets has successfully managed to eliminate a significant overhang on its stock, purchasing back shares once held by Sam Bankman-Fried, the embattled former CEO of the now-defunct cryptocurrency exchange FTX. This development comes as Bankman-Fried faces a slew of criminal charges, casting a shadow over the future of these shares and the potential impact on Robinhood’s market standing.
The retail-focused broker saw its stock (ticker: HOOD) climb 3.2% in premarket trading on Friday, following the revelation detailed in a filing that Robinhood had bought back more than 55 million of its own shares from the U.S. Marshall Service for an immense sum of $605 million. This significant stake, once under the control of entities linked to Bankman-Fried, represents a considerable portion of the company, which boasts a market capitalization just under $10 billion.
Robinhood Clears Stock Overhang with $605 Million Share Buyback
Robinhood Buys Back Shares from Sam Bankman-Fried
Robinhood Markets (ticker: HOOD) has increased its stock value by buying back shares once owned by Sam Bankman-Fried, the former CEO of the now defunct cryptocurrency exchange FTX. This move has cleared an overhang for Robinhood’s stock. Bankman-Fried, who faces a multitude of criminal charges, once held a substantial stake in Robinhood.
Robinhood’s Stock Rises
The retail-focused broker made a statement in a filing stating that it had completed a share purchase agreement with the U.S. Marshall Service on Thursday. Robinhood revealed that it had purchased over 55 million shares of its own stock from the agency, for an estimated $605 million. The news of the buyback led to a 3.2% increase in Robinhood’s stock in premarket trading on Friday.
Bankman-Fried’s Stake in Robinhood
Bankman-Fried bought a 7.5% stake in Robinhood in May 2022. At the time, his empire was intact, and he was considered the industry’s golden boy, potentially even a majority owner of Robinhood. However, just six months later, FTX, which was once valued at $32 billion, filed for bankruptcy. This was accompanied by billions of dollars in customer funds going missing and Bankman-Fried being arrested on fraud charges. He has since pleaded not guilty.
The Impact on Robinhood’s Future
The future of the shares Bankman-Fried owned and whether they would be sold as part of FTX’s bankruptcy process had been an overhang on Robinhood’s stock. The stake was a sizable part of the company, which has a market capitalization just shy of $10 billion. By buying back these shares, Robinhood has removed this uncertainty, resulting in a boost to its stock value.
Takeaways
This development is a significant move for Robinhood, allowing the company to regain control over a considerable chunk of its own shares and remove an overhang from its stock. It also highlights the ripple effects of FTX’s bankruptcy and Bankman-Fried’s legal troubles on other entities connected to them. As Robinhood continues to navigate the complex landscape of retail trading, this event underscores the importance of robust risk management and the potential impact of individual stakeholders on a company’s stock.
