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Stock trading app Robinhood recently announced plans to buy back a sizable SBF HOOD stake in conjunction with the DOJ.
Robinhood (NASDAQ: HOOD) plans to buy back the massive $578 million company stake owned by embattled ex-FTX CEO Sam Bankman-Fried (SBF). Robinhood’s board of directors recently approved the plan to repossess a stake owned by SBF, which is more than 7%. However, the financial services company has admitted that it could not guarantee when or if the buyback would happen.
Robinhood said it is working closely with the Department of Justice to facilitate the move, which entails 55 million shares. These HOOD shares have been at the center of a dispute between SBF and domestic and international entities. Among this group is the troubled New Jersey-based digital asset lending platform, BlockFi.
Robinhood Shares Up 3% Following Planned SBF Stake Buyback & Q4 2022 Results
Robinhood shares were up 3% in after-hours trading following the announced SBF stake buyback and Q4 2022 earnings release. For the fourth quarter of last year, the company saw a 5% rise in net revenue to $380 million.
Weighing in on the development, the company’s chief financial officer Jason Warnick explained in a media session:
“Our board authorized us to buy the shares of Robinhood that were originally acquired by Emergent Fidelity Technologies, that FTX subsidiary. And that’s been a big question on shareholders’ minds and a technical overhang, what’s going to happen with these shares.”
Warnick also added:
“The board has authorized us to go and repurchase those and so we’re in discussions with the DOJ on that. Hard to tell exactly what the timeline is going to be.”
However, Robinhood promised to provide “updates as appropriate” regarding the share purchase in its earnings report.
A January 20th filing by the DOJ, which seized SBF’s Robinhood stake, revealed that the former FTX chief executive held 55,273,469 HOOD shares. SBF originally purchased the sizable stake, which translated to 7.6% of Robinhood’s capitalization, last May. The share purchase was facilitated through Emergent Fidelity Technologies, with the initial value at $649 million. However, as of Wednesday’s close, the stake value is just over $578 million.
SBF controlled Emergent Fidelity as sole director and majority owner alongside fellow FTX co-founder Gary Wang. According to court filings, Bankman-Fried and Wang extracted loans directly from Alameda Research to fund the share purchase. These shares are also at the heart of a legal tussle between FTX, SBF, BlockFi, and numerous other international entities.
DOJ HOOD Seizure
Early last month, reports stated that the DOJ seized $465 million in Robinhood shares and an additional $20 million in fiat currency. At the time, the US law enforcement department stated that the seized assets aligned with its ongoing criminal case against SBF.
The DOJ also added that SBF, BlockFi, and FTX creditor Yonathan Ben Shimon all previously made competing claims to the Robinhood stock. Furthermore, the federal executive department revealed that Bankman-Fried sought access to the HOOD shares to pay his legal fees.