June 15, 2024

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Robinhood is buying cryptocurrency exchange Bitstamp in a surprise $200 million deal

Robinhood is buying cryptocurrency exchange Bitstamp in a surprise $200 million deal

Robinhood announced Thursday that it has acquired Bitstamp, one of the world’s oldest cryptocurrency exchanges, in an all-cash deal expected to be worth about $200 million. The acquisition, which is expected to close in the first half of 2025, will advance one of Robinhood’s strategic goals by expanding the company’s presence in foreign markets.

Bitstamp has been a staple part of the cryptocurrency industry since 2011 when it launched in Slovenia, later moving to Luxembourg and the UK. However, its market share has declined in recent years, and despite having four to five million customers, Bitstamp now ranks 16th in trading. Volume between cryptocurrency exchanges. Its largest market remains Europe, but it also has customers in the UK, Asia and the US

In an interview with luckJohan Kerbrat, managing director of Robinhood Crypto, noted that Bitstamp has 50 active licenses worldwide, and that the exchange is also doing strong trading with institutions. He added that the deal would be an important first step toward another of Robinhood’s strategic priorities, which is developing an institutional business to complement its fast-growing suite of consumer products.

The acquisition comes as a surprise given there have been no reports of Bitstamp going up for sale, and with Robinhood recovering from a rough 2023 that saw the price of its shares, currently trading at around $22, fall to $7. The economic downturn, which gave rise to rumors that Robinhood had become a takeover target, was part of a broader reckoning that cast doubt on the overall health of the fintech sector.

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In 2024, it’s a much different story for Robinhood as the company posted record first-quarter earnings and last week announced $1 billion worth of stock. Buy back. At the same time, it has begun to move away from feast-or-famine stock trading, adding services such as credit cards and retirement accounts that are less vulnerable to market fluctuations.

Robinhood’s acquisition of Bitstamp coincides with a major rally in cryptocurrency markets that has seen the price of Bitcoin rise more than 60% since the beginning of the year, and the company recorded a three-fold increase in cryptocurrency revenue during the first quarter.

The deal also has the potential to transform Robinhood’s existing crypto operations, which primarily revolve around acquiring Bitcoin and other currencies from market makers. By acquiring Bitstamp, Robinhood will be able to source cryptocurrencies from its own exchange instead, and potentially invite its customers to trade there. Bitstamp also offers up to 85 digital tokens on some of its marketplaces, compared to the dozen or so offered by Robinhood, as well as lending and staking services.

Any attempt by Robinhood to increase cryptocurrency offerings in the United States could face scrutiny from the Securities and Exchange Commission, which indicated in May that it planned to sue the company over its token offerings. The SEC’s move came as part of a broader attack on the cryptocurrency industry, but it may be on shaky legal ground as both courts and elected officials have accused the agency of overreach.

As for whether Bitstamp will remain as a standalone brand, or be rebranded as a Robinhood product, Kerbrat said it is too early to say because the deal will not close until next year.

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The acquisition comes nearly a year after reports that Bitstamp was In conversations To raise funds to expand its operations in the UK and Asia. At the time, CEO Jean-Baptiste Grafteau said the company was not looking to sell itself.

In Robinhood’s press release announcing the acquisition, Gratfieaux stated: “Bringing Bitstamp’s platform and expertise to the Robinhood ecosystem will give users an enhanced trading experience with a continued commitment to compliance, security, and customer focus.”

Barclays Capital acted as financial advisor to Robinhood in connection with the transaction, while Galaxy Digital Partners acted as advisor to Bitstamp.