Robinhood is bleeding. Jamie Dimon is spending.

Is Robinhood up for sale?

Fintech is disrupting Wall Street. Or is it the other way around? As one new-wave company bleeds billions, a member of the old guard is getting ready to spend. Those trends could collide in an unlikely — but not impossible — megadeal.

We’re talking about JPMorgan Chase and Robinhood. One dates back to early Wall Street, while the other was inspired by Occupy Wall Street.

• CEO Jamie Dimon once said the bank should be “scared shitless” about the rise of fintech. He’s vowed to spend $12 billion on tech, partly to take on competitors including fintech disruptors.
• Meanwhile, one of those disruptors, Robinhood, whose popular, commission-free app upended online stock trading, saw its shares sink Friday to an all-time low of $12.77, shedding 85% of its market cap — more than $60 billion — since its shares peaked briefly after it went public in July.
• Robinhood has lost so much value there’s now speculation that it could be an acquisition target .

Could JPMorgan come to Robinhood’s rescue? The proposal intrigued some people we spoke to.

• JPMorgan retreated from online brokerage in 2005, divesting its BrownCo division to E-Trade. It returned to the business in 2018, sending shares of discount brokers diving with its promise of 100 free trades for the first year.
• The big bank made two key hires in its self-directed investing unit in September, with plans to add margin and securities-based lending products this year.
• Robinhood would add a lot of younger customers who trade actively, instantly bulking up the JPMorgan unit. It would also give the bank some exposure to crypto, which is popular with Robinhood customers. Robinhood just introduced a crypto wallet, too.
• Robinhood declined to comment. JPMorgan could not immediately be reached for comment.

The problem: Robinhood probably wouldn’t go for it. And because of its stock structure, it wouldn’t have to sell.

• Selling to JPMorgan would probably be “a complete non-starter for Robinhood,” said Rob Siegel, a Stanford management lecturer. For Vlad Tenev and Baiju Bhatt, “selling to one of the world's largest banks and financial institutions would be inconsistent” with their stated values.
• It would be a huge culture clash. Just for example, Robinhood has embraced remote work, like most tech companies, while JPMorgan was pushing a return to the office up until the point the omicron surge made that impossible.
• Going hostile won’t work. Tenev and Bhatt control roughly 65% of the voting power through super-voting shares.
• Even with the dramatically depressed valuation, Robinhood may not be that attractive, said Melody Brue of Moor Insights & Strategy. There are issues to deal with in Robinhood’s business model, she said, led by “the questionable future” of payment for order flow, and Robinhood’s heavy reliance on volatile crypto revenue.
• While JPMorgan may be looking to buy, the bank would more likely seek “lower-priced deals” and would see Robinhood “as more of an overpriced brand than as a missing set of product capabilities,” Alex Johnson of Cornerstone Advisors said.

Don’t write off a deal. A struggling trading app being gobbled up by a big bank is not as far-fetched as it might have seemed just a year ago, when Robinhood users were upending Wall Street by sending meme stocks to the moon.

• The Wall Street giant, worth more than $400 billion, could afford it. And Robinhood is struggling, Johnson noted: It has “a tough time making money unless customers are being super active buyers and sellers, especially of stock options and of crypto.”
• Buying a company with 19 million users and 22 million funded accounts would give JPMorgan access to a significant customer base. "The real advantage would be buying younger customers,” Siegel said.
• Then there’s Dimon’s disdain for fintech, Michele Alt of Klaros Group said, suggesting going after Robinhood is possible, though the M&A team at JPMorgan would be “clear-eyed” about the risks and benefits of a deal.
• Besides, for Dimon, what better way to stick it to the fintech newcomers than to buy one?

“Stranger things have happened,” Siegel said. Who knows? Dimon, who just got a whopping raise , clearly feels pressure to fend off the fintech threat. There was a time when he was a disruptor: The Travelers deal to buy Citi, in which he played a key role , smashed together commercial and investment banks. “We intend to win,” Dimon said on the JPMorgan earnings call, referring to the bank’s big tech investment. “And sometimes that means you’ve got to spend a few bucks.”

– Benjamin Pimentel ( email | twitter )

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