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Robinhood stock price tumbles as FTX founder Sam Bankman-Fried may be forced HOOD seller

By Jenal Mehta

14:22, 10 November 2022

SBF in court
Will SBF be forced to sell his Robinhood shares as FTX faces collapse? Sequoia marks its stake down to zero Photo – Getty Images

Robinhood (HOOD) stock tumbles 30% in the past week as FTX founder Sam Bankman-Fried (SBF) may be forced to sell his stake.

SBF owns a 7.6% stake in Robinhood, which he only bought as recently as May 2022.

This week, the world's biggest crypto exchange Binance backed out of a deal to buyout its smaller rival FTX, the future of FTX now looks grim.

Furthermore, SBF has seen much of his net worth evaporate as the crypto market continues to crash, markets now speculate he is likely to be forced to take this stake in Robinhood.

Robinhood (HOOD) Price Chart

China based Binance proposed buying out its rival, FTX as part of a rescue takeover deal.

This deal was put forward in order to save FTX from liquidity issues. FTX had struggled to meet its surge of withdrawals as the crypto market began its rapid downward trajectory.

Binance is world’s largest crypto currency exchange and this move to take over rial would not only give it access to FTX’s customers but also would have potentially saved the cryptomarket from further collapse.

Binance said just days later that after viewing internal financial books, it will not go ahead with the take-over.

BTC/USD

68,588.55 Price
-0.240% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

Oil - Crude

78.21 Price
+0.610% 1D Chg, %
Long position overnight fee 0.0074%
Short position overnight fee -0.0293%
Overnight fee time 21:00 (UTC)
Spread 0.040

Gold

2,348.58 Price
+0.620% 1D Chg, %
Long position overnight fee -0.0198%
Short position overnight fee 0.0116%
Overnight fee time 21:00 (UTC)
Spread 0.50

XRP/USD

0.53 Price
-0.100% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

“Our hope was to be able to support FTX's customers to provide liquidity, but the issues are beyond our control or ability to help” it said in a statement to Wall Street Journal.

FTX is funded by Softbank and Sequoia Capital among others.

In a letter to investors this week, Sequoia Capital said “in recent days liquidity crunch has created solvency risk for FTX. The full nature and extent of this risk is not known at this time. Based on our current understanding, we are making our investment down to $0”

The events currently taking place highlights the instability of the loosely regulated crypto market.

Even if SBF does not sell his stake, Robinhood (HOOD)  is likely to be affected by the drop in value of BTC and other cryptocurrencies, and may even face the same liquidity issues currently happening at FTX.

This event is likely to create an uncontrolled ripple effect across the industry, much like the collapse of Lehman Brothers back in 2008.

As of now CEO and co-founder of Robinhood Vlad Tenev, has tried to distance his company from the FTX story in a series of tweets and saying that their liquidity management is different. He concludes that it is “it’s business as usual @robinhoodapp”

Markets in this article

HOOD
Robinhood Markets Inc (Extended Hours)
20.55 USD
1.31 +6.840%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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