History in the making: Goldman Sachs to buy Celsius for $2B 🤯; FTX acquiring Robinhood would create a FinTech beast we never seen before 👀; Australian neobank Volt goes to the wall 😵
You're missing out big time... Weekly Recap 🔁
👋 Hey, Linas here! Welcome back to a 🔓 weekly free edition 🔓 of my daily newsletter. Each day I focus on 3 stories that are making a difference in the financial technology space. Coupled with things worth watching & most important money movements, it’s the only newsletter you need for all things when Finance meets Tech.
If you’re not a subscriber, here’s what you missed this week:
If you aren’t a late-stage FinTech, you might need to worry 👀
Credit Suisse’s drug money and the future of bank & FinTech regulation 🔍
New platform enabling regular people to invest in VC funds 💸
Another crypto bridge hack & key ecosystem weakness 🔐
and more!
As for today, here are the 3 FinTech stories that were making a difference this week. It undoubtedly was one of the hottest weeks this year!
History in the making: Goldman Sachs to buy Celsius for $2B 🤯
The news 🗞 Investment banking giant Goldman Sachs was reportedly approached by at least one institutional investor asking Goldman to advise and broker a potential deal for Celsius’ assets, a crypto platform that’s been fighting insolvency.
More on this 👉 GS is considering helping an investor raise approximately $2B to snap up distressed assets stuck in limbo from troubled digital asset lender Celsius, according to two sources familiar with the matter, Blockworks reported.
The deal — which one source said likely would happen via the investment bank’s asset management unit — could see investors purchase assets from Celsius at a discount, even if the lender does not declare bankruptcy.
This is history in the making as we have never seen an investment bank restructuring a crypto business. Here’s the takeaway on why GS is doing it & what it might mean:
✈️ THE TAKEAWAY
A win-win strategy 🏆 If the rumors are true and this will happen, it means several things. First and foremost, TradFi is entering crypto, and it is doing it all at the right price. We might see more of such examples appearing as insolvency and illiquidity issues continue to be worked out after Terra blowup, the global macro environment being in total uncertainty, and a result of corporate strategy not working out. Next, why they are doing this? GS isn’t buying Celsius per se - it’s buying their assets. And this is their product functions, giant client list, not to mention they have to buy someone to get in the crypto game anyway. And distressed assets are super profitable if they have the value that can be extracted by the right owner (GS knows this very well). Worst case scenario? They can dump all these assets (bought at a good discount) at a profit and go home. As simple as that. So ultimately, it’s a win-win strategy irrespective of how you are looking at it.
FTX acquiring Robinhood would create a FinTech beast we have never seen before 🤯
The breaking news 🔥🗞 Crypto exchange heavyweight FTX, which recently became the largest fiat crypto exchange, is reportedly looking into acquiring Robinhood, once one of the hottest FinTechs in the world. Bloomberg first reported the news citing unnamed sources.
More on this 👉Although FTX CEO Sam Bankman-Fried denied any active M&A conversations taking place, it’s probably only a question of WHEN not IF. Here’s why:
The change 📉 The retail brokerage app has become less attractive now that meme stock mania has faded (this can clearly be seen in both customer & revenue growth), markets are nervous over interest rate hikes, crypto prices are down, and hyperactive day trading has been partially replaced by “buy and hold” strategies. More importantly, the $HOOD share price is super cheap, which makes total sense for a company like FTX to buy it.
What’s the impact? 🤔 This could be massive. The acquisition would create a FinTech beast we have never seen before. Here’s the takeaway:
✈️ THE TAKEAWAY
Growth, growth, growth 🚀 Let's just take a look at the numbers. Robinhood has:
(1) Large userbase with 22M funded accounts; (2) $90B in assets under custody; (3) Addictive UX; (4) Enterprise value of just $2.7B; (4) Bankman-Fried already has a 7.6% stake in the company, making him the 3rd largest shareholder. Therefore, having Robinhood under its hood, FTX would immediately become one of the biggest and most powerful players in both traditional and digital asset markets. No wonder why the $HOOD was up 12% after the news before the trading was halted. This is huge.
Another one bites the dust - Australian neobank Volt goes to the wall 😵
The news 🗞 Australia-based online-only Volt Bank has announced it would shut down returning deposits, and selling its mortgage book after failing to raise sufficient funds to support the business.
More on this 👉 Headquartered in Sydney, Australia, Volt was founded in 2017 and was the first company granted a restricted full license in May 2018 to operate as an authorized deposit-taking institution (ADI). Volt was also the first new institution to be licensed as a retail bank in the country since the Australian Bank in February 1981, which ceased operations in 1989.
The restricted ADI licensing scheme was established to attract newcomers to enter Australia’s banking system.
The company had AUD 113M ($78M) in deposits and AUD 80M of home loans as of April 2022, a tiny fraction of the AUD 3T mortgage market. The company said no customer would be left out of pocket.
✈️ THE TAKEAWAY
Australia is a tough market for FinTechs🇦🇺 Volt is the 2nd Aussie challenger bank to fail following Xinja, which was granted a license in 2019. Funding complications spurred by the pandemic led to Xinja returning its banking license to APRA in 2020, though it still operates as a FinTech. Zooming out, we must note that 4 challenger banks were created following a 2018 inquiry into Australia's banking sector, and Judo Bank is the only survivor now. Another challenger bank 86 400 was acquired by Ubank, an Australian direct bank owned by National Australia Bank (NAB). High capital requirements make it extremely difficult for new entrants to compete with incumbents in Australia’s banking market. Furthermore, rising interest rates have made borrowing more expensive amid a VC flight from loss-making FinTechs that has hit market valuations across the sector. FinTech is hard, especially when it comes neobanking. And it’s even harder in Australia.
🔎 What else I’m watching
$COIN ratings 📉 Rating agency Moody’s has downgraded Coinbase’s corporate debt and also placed its debt ratings for the crypto exchange under review for further downgrade. Moody’s cited “Coinbase's substantially weaker revenue and cash flow generation” for its reappraisal. This is one of the very few cases where rating agencies indeed have a solid point…
FinTechs in trouble? 🤔 In India🇮🇳, the country’s central bank is cracking down on FinTech startups, as per TechCrunch. The Reserve Bank of India (RBI) has informed dozens of vendors that it’s barring the practice of loading “non-bank prepaid payment instruments” — prepaid cards, for instance — using credit lines. Some affected founders are pushing the narrative that incumbent banks lobbied the RBI to reach a decision favorable to them. So maybe FinTech is indeed making a difference?
Lots of losses 👀 Cryptocurrency market maker and lending firm Genesis Trading is facing potential losses into the “hundreds of millions.” The losses at Genesis relate, in part, to exposure to over-leveraged hedge fund Three Arrows Capital (3AC) and crypto lender Babel Finance. Here we go… 🎉
💸 Following the Money
London and Paris-based FinTech Hokodo raised a $40M Series B led by Notion Capital. The startup is looking to bed down in an increasingly crowded market and says it's been entering a new market every 3 months.
Octopus Ventures launches £10M pre-seed fund. The London-HQ'd VC has just closed its first ever pre-seed fund and plans to pump the money into the B2B software, FinTech, and HealthTech sectors.
UK-based unicorn Zilch has extended its Series C by $50M, taking the total raised to $160M. The extension brings Zilch’s total funding to more than $460M in debt and equity and sees the FinTech company maintain its valuation.
👋 That’s it for today! Thank you for reading and have a relaxing weekend! And if you enjoyed this newsletter, invite your friends and colleagues to sign up: