Robinhood Markets Inc (NASDAQ:HOOD) is gearing up for its fourth-quarter earnings call on Wednesday, February 8, the first since the hybrid exchange found itself at the centre of the FTX calamity in November 2022.
Robinhood – which expanded into cryptocurrency trading in recent years – was left exposed following the collapse of FTX, formerly the second-largest cryptocurrency exchange, due to FTX founder and former chief Sam Bankman-Fried’s 7.5% stake in the company.
Fears that Bankman-Fried was poised to dump his Robinhood stock prompted shareholders to rush for the exits.
Robinhood chief Vlad Tenev moved to assure investors that “despite SBF having an equity stake in Robinhood, we have no direct exposure to Alameda, FTX, or any of its entities”, but Robinhood shares proceeded to crumble over 30% in the week following FTX’s implosion.
Earlier this year, around US$500mln in Robinhood shares held in an account linked to Bankman-Fried were seized by the US Department of Justice.
Nasdaq-listed Robinhood shares have fared comparatively well in 2023, having rallied 33% to US$10.74 year to date with a market capitalisation of around US$9.5bn.
“It’s been a difficult few months for Robinhood Markets although there does appear to be some stabilisation in the share price, having hit record lows last summer,” said chief market analyst Michael Hewson at CMC Markets.
Hewson predicts losses to come in at 10c per share, a 50% improvement on losses of 20c per share in the third quarter.
“The outlook is set to remain challenging, given the uncertainty around the crypto space and the recent collapse of FTX, and other failures,” said Hewson. “That US$38 IPO price seems a world away right now.”
Robinhood projects a decrease in operating expenses for the full year, with total operating expenses expected to peak at US$2.4bn, a decrease of around 31% from the previous year.
Operating expenses before share-based compensation are estimated to come in at around US$1.7 bn, a decrease of 9% to 10% from the previous year.
Share-based compensation for 2022 is projected to be between US$645mln and US$685mln, a decrease of 56% to 59% from the previous year, including net reversals of US$77mln from restructuring initiatives.