Robinhood to Acquire Income-Based Credit Card Company X1 for $95M Cash
Coinspeaker
Robinhood to Acquire Income-Based Credit Card Company X1 for $95M Cash
Financial services and stock brokerage firm Robinhood Markets Inc (NASDAQ: HOOD) has concluded a $95 million cash deal to acquire income-based credit card startup X1. Robinhood said the acquisition is a great way to expand its product offerings while solidifying its relationship with current customers.
X1 is a no-fee credit card that offers rewards to users. The company raised $15 million in December, bringing its total funding to $62 million since its inception in 2020. X1 received funding from various backers at that time, including FPV, Spark Capital, Craft Ventures, and Soma Capital. Although the company’s valuation is unknown, co-founder Deepak Rao said the last funding raised X1’s valuation by 50%.
Robinhood Bailing Out Customers via X1 Acquisition
In a company release, Robinhood CEO and co-founder Vlad Tenev said buying X1 helps to solve financial problems facing its users. According to Tenev:
“This acquisition will bring us closer towards our goal of serving the entirety of our customers’ critical financial needs. Together with X1, Robinhood will now be able to offer our customers access to credit.”
X1 allows access to credit based on a user’s income and not their credit score. The company floated this model to help users with regular income, notwithstanding their credit status. Interestingly, X1 also doesn’t charge for foreign transactions or take an annual card fee.
Depending on customary closing conditions, the final merger should be completed in the third quarter of the year. According to the company release, JPMorgan Securities, LLC is Robinhood’s exclusive financial advisor on the deal.
Acquiring X1 gives Robinhood access to a wide array of customers. It also serves many people who need credit without worrying about a credit score, possibly giving the company an earnings boost outside of the interchange fees it currently charges.
Following the acquisition, X1 co-founders Siddarth Batra and Rao will be in charge of new business for Robinhood. The company release also states that Rao will function as the general manager for credit cards and will report to Tenev.
Robinhood First Quarter Showed Increased Revenue
Last month, Robinhood announced a 47% increase in revenue in its earnings report for Q1 2023. According to the financial services firm, the income for its first quarter jumped to $441 million even though its net loss was 30% higher. Furthermore, Robinhood announced $38 million from crypto trading, nearly 30% lower than the $54 million recorded in Q1 2022.
The company recorded growth in net deposits and increased market valuations in stock and crypto assets, lending a 26% jump to its assets under custody (AUC) which hit $78 billion. Robinhood’s monthly active users (MAUs) also rose to 11.8 million, with net cumulative funded accounts hitting 23.1 million following an additional 120,000. Speaking on the results at the time, Tenev explained that customer satisfaction and GAAP profitability are important goals the company has set for itself.
Robinhood to Acquire Income-Based Credit Card Company X1 for $95M Cash