Robinhood Has Become an Attractive Takeover Target
The online broker’s shares have tumbled 80% from their peak, but its 22 million users are worth something, even if the average account balance is only $3,500.
Robinhood hasn’t rewarded its shareholders.
Photographer: Chris Demas/AFP via Getty Images
It’s been quite a year for brokerage firm Robinhood Markets Inc., from a rollicking initial public offering to technical glitches that blocked its customers from accessing their accounts, and from capital raising efforts to questions about how it guarantees the best execution of trades. Today, the shares are languishing at around $15, cutting its market capitalization to about $13 billion from a peak of some $60 billion back in August.
But is the carnage in Robinhood stock overdone? After all, Robinhood has 22 million users, which is worth something, even if the average account balance is only $3,500. The thinking is that small accounts will grow into large accounts as Gen Zers and Millennials get older, earn more money and stick with Robinhood instead of bolting for a more established brokerage with more offerings. Charles Schwab Corp. has 32 million accounts, with an average value of $240,000. Schwab also sports a $172 billion market cap, which values the company at $5,375 per account, versus $591 for Robinhood. Even so, Robinhood still looks a bit expensive even after the decline in the price of the stock.