Fintech: Analyzing Robinhood's $200MM Acquisition of Bitstamp
At first glance Bitstamp seems to be undervalued in this transaction. Is it though?
Today we highlight the following:
DIGITAL INVESTING: Robinhood takes its crypto offering global through its acquisition of Bitstamp
LONG TAKE: Finance is entertainment, 500,000 tokens launched on Solana last month
CURATED UPDATES: Financial Institutions and Adoption; DeFi and Digital Assets; Blockchain Protocols; NFTs, DAOs and the Metaverse
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DIGITAL INVESTING: Robinhood takes its crypto offering global through acquisition of Bitstamp
The digital broker Robinhood is acquiring cryptocurrency exchange Bitstamp for $200MM in cash. This signals a desire to expand the company’s highly profitable crypto trading services internationally and leverage Bitstamp’s extensive regulatory licenses.
Let’s take a quick look at Robinhood’s operating performance.
While Robinhood experienced a big Covid bump and subsequent collapse, the recent market rally in both equities and crypto has been a positive catalyst. There are 24 million funded customers, of which 1.7 million pay a Gold subscription. Remember that the rewards on that subscription are now 3% back on a captive card. Those customers have $130B of assets with Robinhood, of which $26B are crypto assets. That’s a pretty meaningful number! From a revenue perspective, Robinhood is making $126MM of its $329MM quarterly revenue from crypto — more than 30%, and its most juicy segment from a profitability perspective.
We can see why acquiring adjacent assets in this space is strategic.
Currently, Robinhood offers 15 cryptocurrencies to US retail investors and over 30 in Europe. Its licenses cover the US, UK, and parts of Europe, including Italy, Poland and Lithuania. On the other hand, Bitstamp lists more than 85 tokens and holds over 50 active licences and registrations globally, notably across the EU and Asia. This includes a recent approval in Singapore, making it the first crypto exchange with EU presence to have approval in the jurisdiction.
For Robinhood, the acquisition instantly provides access to more liquidity across these assets, as well as enabling global expansion through the comprehensive set of licenses held by Bitstamp. Bitstamp also adds institutional offerings, including reliable trade execution, deep order books, API connectivity, staking, lending and a white label solution, Bitstamp-as-a-service.
When looking at the numbers, at first glance Bitstamp seems to be undervalued in this transaction. Is it though?