Because no one tougher parts than me, I spent part of my week reading Coinbase’s investor call after its earnings report. The US crypto exchange raises some non-analyst questions in its discussions, making for a slightly more entertaining set of prompts and answers. You can read everything here.
I bring this up because someone asked Coinbase if the company could spot a “strategic advantage in acquiring or merging with Robinhood.” You might be shocked to learn that Coinbase wasn’t entirely keen on the idea.
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And then, yesterday, the CEO of Coinbase rival FTX, Sam Bankman-Fried, disclosed that he had purchased 56,273,469 shares of Robinhood, representing approximately 7.6% of the company’s common stock.
Robinhood shares rose significantly in premarket trading, rising nearly 24% following the news. Why? Because investors are hoping FTX will pick up Robinhood for a bounty. If FTX were to buy Robinhood, investors would likely expect an exit price well above its depressed price. Therefore, when the FTX CEO entered the stock, its potential short-term exit value increased, making it a buy.
According to Bankman-Fried’s filing, he thinks Robinhood shares “represent an attractive investment.”
There is an interesting tension between Coinbase and FTX news that we should unpack. It’s Friday, and we deserve a little reflection. Let’s have fun !
If stocks go crypto, will crypto become stocks?
A running joke at TechCrunch is that all fintech companies, no matter where they start, end up looking the same.
A good example is SoFi, best known for its student loan refinancing work, which now offers credit cards, mortgages, business products, checking accounts and more. SoFi even offers crypto investments to some degree, which might seem like quite a long time from where it originated.
The fact that SoFi has expanded isn’t a problem; instead, it’s a reminder that user acquisition in the fintech market is expensive. This high cost makes it a good deal to try to get every user in your fintech business to use as many products as possible after they’ve been acquired. The logic here is simple: CAC is CAC, so if you want to build client leverage, add more LTV. (In business terms, CAC stands for “customer acquisition cost,” while LTV refers to the lifetime value of a customer.)
It’s also why we’ve seen Square go Block and spread its wings in the fiat and web3 economies, why you can buy and sell crypto with PayPal, and more.
And yet, when Coinbase held its earnings call, President and COO Emilie Choi responded with the following response to the question about whether to buy Robinhood (highlighted by TechCrunch):