Ask Caesar: Should Coinbase Buy Robinhood?

Published February 2, 2022

Welcome to the latest edition of Ask Caesar, where your favorite ape answers your questions about the market!

Today’s question:

Bruh. I’m down $30K on $HOOD. You think $COIN can buy em out in 2022?

-Tommy from Staten Island

So should Coinbase (COIN) Robinhood (HOOD)?

Maybe… maybe not.

IMPORTANT POINT: I am not saying Coinbase WILL buy Robinhood. But I believe Coinbase SHOULD buy Robinhood.

Coinbase + Robinhood = Brokerage Powerhouse?

Coinbase is the #1 crypto currency trading platform with 7.3 million users.

And Robinhood has 17.3 million users.

However, activity on Robinhood has been sliding, so let’s assume that number is around 15 million.

If we assume that many customers are on both platforms, Coinbase might be able to add 10 million new users by integrating Robinhood.

So people could theoretically start trading stocks directly on the Coinbase or Coinbase Pro apps.

The Problem With Coinbase Buying Robinhood

Coinbase and Robinhood have a major difference: Coinbase charges fees and is VERY profitable.

In Q3 of 2021, Coinbase reported net income of $406 billion on $1.3 billion in revenue.

Robinhood is a mostly free platform and is very unprofitable. In its most recent quarter (Q4 of 2021), Robinhood had a loss of $423 million on Revenue of $363 million.

So even if Coinbase could cut Robinhood’s loss in half, that’s a $200 million quarterly loss, which would have a massive impact on Coinbase’s profits.

And in all likelihood, Coinbase would have to radically shift the Robinhood platform.

They could certainly do that in crypto.

Coinbase supports more than 50 crypto currencies, while Robinhood only offers these coins:

  • Bitcoin (BTC)
  • Bitcoin Cash (BCH)
  • Bitcoin SV (BSV)
  • Dogecoin (DOGE)
  • Ethereum (ETH)
  • Ethereum Classic (ETC)
  • Litecoin (LTC)

BUT… there’s a problem. Robinhood’s crypto trading is free, and Coinbase is on the expensive side.

So Robinhood members might just balk at the idea of buying cryptos from Coinbase.

And Coinbase members might theoretically want to trade cryptos on Robinhood because Robinhood is FREE!

The Other Problem With Coinbase Acquiring Robinhood

Right now, it would probably take $15 billion to buy out Robinhood.

So if Coinbase netted, say, 10 million new accounts, that would be $1,500 per account.

That’s actually not bad, especially if Coinbase gets those accounts generating more revenue.

Final Thoughts on Robinhood

But right now, Robinhood accounts are generating $64 per year in revenue.

So unless Coinbase could get that up 10 fold or more, $1,500 per account seems like a ripoff!

My Final Thoughts on Robinhood

If the stock goes under $5, I’ll think about buying Robinhood. Because someone will want to acquire it for the accounts and data. For now I’m steering clear.

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