(TheStreet) - Shares of Robinhood, the brokerage, plummeted by 15% as FTX was acquired to save it from collapsing.
Robinhood (HOOD) - Get Free Report shares tumbled on Nov. 8, ending off $2.29, or 19%, at $9.74 a share as Binance, the crypto behemoth, said it would acquire FTX, which was once its rival due to a "liquidity crunch."
The terms of the deal were not disclosed. The pending deal surprised investors since Binance founder Changpeng Zhao and Bankman-Fried have fought for several months on social media, including a major clash this week.
“To protect users, we signed a non-binding LOI, intending to fully acquire FTX and help cover the liquidity crunch," Zhao said in a tweet. "We will be conducting a full DD in the coming days.”
The downfall of cryptocurrency exchange FTX on Nov. 8 could be a wakeup call for investors who expressed concern about the future valuation of the digital assets.
Venture capital firms made large investments into FTX in 2021 with Sequoia providing $420 million in a round that that boosted the exchange's valuation to $25 billion in October 2021. A consortium with Paradigm invested $400 million in January 2022, bringing the valuation to a massive $32 billion.
The first investor that funded FTX was Binance, the largest global crypto exchange, but the relationship between the two companies crumbled as FTX gained popularity and fans.
Robinhood Faces More Woes
Even having a billionaire buy a stake in Robinhood has not helped the beleaguered brokerage.
Bankman-Fried's net worth is $15.6 billion as of Nov. 7, according to Bloomberg Billionaires Index. His fortune has only shrunk by $620 million since January.
