Robinhood Shares Surge 26% on Crypto Expansion and EU Product Launch

Robinhood Markets has seen a significant surge in its share price, climbing nearly 26% over the past month. This increase is largely attributed to the company's recent expansions into tokenized equities and crypto infrastructure. The firm has launched a new product in the European Union that allows users to trade over 200 U.S. stocks and ETFs through tokenized derivatives built on blockchain technology. This innovative offering provides exposure to the valuations of major private companies such as OpenAI and SpaceX for its European clients.

In addition to this product launch, Robinhood has finalized its acquisition of Bitstamp, a global crypto exchange operator with more than 50 licenses and registrations worldwide. This strategic move enhances Robinhood’s regulatory footprint and opens the door to enterprise-grade offerings, including lending, staking, and tools tailored for institutional clients such as hedge funds and fintech firms. The acquisition is expected to bolster Robinhood’s position in the crypto market and provide a more robust infrastructure for its users.

This expansion comes at a time of renewed market optimism for crypto, driven in part by more favorable signals from U.S. regulators and support from influential figures. The bullish environment has added momentum to Robinhood’s recent performance, making it an attractive option for investors. Despite the stock’s rally, some analysts caution that Robinhood’s valuation remains steep, with a price-to-sales ratio of 24.1 compared to 3.1 for the S&P 500, and a price-to-earnings ratio of 49.5, far above the benchmark’s 26.9.

However, Robinhood’s fundamentals show significant growth. Over the last 12 months, revenue surged nearly 60% to $3.3 billion, and quarterly revenues rose 50% year-on-year. Profitability is also strong, with a net income margin of 48.8% and operating income of $1.3 billion, reflecting a 39% margin, well above industry norms. While expensive, Robinhood’s aggressive growth strategy and high margins may appeal to investors bullish on tokenized finance and institutional crypto adoption.

Despite the positive developments, Robinhood has come under regulatory scrutiny in the EU after launching tokenized stock products linked to private companies like OpenAI and SpaceX. The Bank of Lithuania confirmed it is investigating the legality and investor disclosures related to these blockchain-based “Stock Tokens,” which launched on June 30. OpenAI publicly disavowed any connection, stating it never approved the tokens and warning investors to be cautious. The controversy escalated when Elon Musk, reacting to OpenAI’s denial, labeled the firm’s equity “fake,” but did not directly address the SpaceX tokens.

Robinhood clarified that its tokens are not actual shares but price-tracking derivatives issued on Ethereum’s Arbitrum network, available only in the EU. Despite lacking equity rights, Robinhood’s stock surged 13% after the launch before cooling off in early July. Critics argue that Robinhood’s tokens are misleading, pointing out the lack of legal clarity and investor protections. Legal experts warn that if launched in the US, the product would likely face SEC action. They note the tokens offer no actual equity or governance rights, leaving investors with synthetic exposure and potential liquidity risks.