According to a report released on Friday by investment bank Architect Partners, Robinhood (HOOD) is increasing the size of its cryptocurrency business and is still growing it despite the U.S. Securities and Exchange Commission (SEC) sending it a Wells Notice last month.
The bank stated that the acquisition of cryptocurrency exchange Bitstamp is indicative of the expansion. According to the architect, in the first quarter of 2024, cryptocurrency made over 20% of Robinhood’s overall earnings. “This acquisition immediately broadens worldwide outreach to guarantee involvement irrespective of U.S. actions,” the paper stated.
An early warning that the SEC has sufficient data to potentially pursue an enforcement action against a corporation is known as a Wells Notice. The SEC sent Robinhood a Wells Notice on May 4 in response to the company offering cryptocurrency tokens that the agency would consider unregistered securities. As one of the “few publicly traded crypto-influenced companies that will be able to serve institutions as they come into the digital asset space,” the Bitstamp acquisition will also broaden Robinhood’s institutional offering. This is in line with the note.
Robinhood purchased Bitstamp at a fair price, and Architect described the cryptocurrency exchange as a “prime asset due to its long operation history and global licencing reach.” When compared to Bitstamp’s $500 million valuation from the 2018 majority investment, Architect observes that Robinhood’s $200 million cash payment represents a substantial reduction.