“They are having to make grown-up business decisions, such as cost reductions and moving out of growth mode,” said Hugh Tallents, a partner with consulting firm cg42. “It’s becoming clear that they once had unbelievable user growth, but they also had a valuation that was insane.”
Bankman-Fried has denied having any interest in a full-blown FTX takeover of Robinhood. Robinhood had no comment after the merger chatter first circulated.
Tallents said he does not think a large Wall Street brokerage would want to bet on Robinhood because of the risk involved. He noted that Robinhood customers tend to be younger and have less money to invest, so an acquirer “would need to play a long game and hope they get more affluent.”
The good news for Robinhood, though, is that despite the short-term concerns, the company still has a solid enough financial cushion to keep it afloat for the foreseeable future. Robinhood ended the second quarter with $6 billion on its balance sheet, down from $6.2 billion in March. So, Tallents said, the situation isn’t dire yet.
Still, Robinhood will need to prove to investors that it can get its growth rate back on track on its own. If not, expect more calls for the company to put itself on the shopping block.
All eyes on the consumer
Is the economy heading to (or is it already in) a recession? Upcoming earnings from some of America’s biggest retailers will provide more clues.
Some analysts think that discount retailers like Walmart and Target could soon rebound.
Read More: Stocks week ahead: Robinhood may need to join forces with a larger Wall Street rival