Fintech Headlines: September 5 - 11, 2022

Coinbase funds lawsuit against Treasury Department, Robinhood launches investor index, PayPal, Shopify and Dave announce C-level hires

This Week’s Gainers and Losers

This was a short week for the markets due to the U.S. Labor Day on Monday. The markets opened Tuesday on a sour note, but then advanced for the remainder of the week with all major U.S. indices finishing in the green. Some commentators attribute the advance to the indices hitting critical support levels, some to the investors “buying the deep” after the three weeks of declines. Go figure.

Coinbase ( COIN 0.00%↑) led the group of Fintech companies, advancing 23.41% during the week. There was no major news to trigger this rally other than the company funding a lawsuit against the U.S. government (more on that below). MoneyLion ( ML 0.00%↑ ) and Dave ( DAVE 0.00%↑) were among the very few Fintech stocks that declined this week. Both companies are neobanks that went public through mergers with SPACs last year. Interestingly, MoneyLion keeps beating its pre-merger forecasts, but still has lost 85% of its market cap since the merger.

Coinbase Funds a Lawsuit Against Treasury

Coinbase made the headlines this week by funding a lawsuit against the U.S. Treasury Department over sanctioning Tornado Cash service earlier in the year. Tornado Cash is a Decentralized Finance (“DeFi”) application running on the Ethereum blockchain that helps users privately transact in cryptocurrencies. The service helps “break” the link between a series of blockchain transactions, making those untraceable.

The Treasury Department argued that the service facilitates money laundering, while the plaintiffs of the lawsuit argued that the actions of the Treasury Department limited the rights of U.S. citizens to transact in privacy. There is even a weirder aspect to this story: Treasury Department essentially sanctioned a piece of code setting a precedent for the future. Not sure how the story evolves, but Coinbase got a lot of cheers from DeFi users.

✔️ Crypto mixing service Tornado Cash blacklisted by Treasury Department for alleged use in laundering
✔️ Coinbase bankrolls lawsuit against Treasury Department following Tornado Cash sanctions
✔️ Coinbase Is Helping Sue The US Treasury Over Tornado Cash Sanctions
✔️ Brian Armstrong's Finest Hour: Backing Tornado Cash Suit Against Treasury

Robinhood Launches Investor Index

Robinhood launched an investor index tracking the performance of “the top 100 most owned investments” on the platform. The index revealed that the most owned stocks on the platform were Apple ( AAPL 0.00%↑ ), Tesla ( TSLA 0.00%↑ ), Amazon ( AMZN 0.00%↑ ), Microsoft ( MSFT 0.00%↑ ), Disney ( DIS 0.00%↑ ), Ford ( F 0.00%↑ ), as well as the "meme stocks", such as GameStop, AMC Entertainment, and NIO.

The skeptics argue that Robinhood caters to the retail investors that primarily invest in “meme stocks”, and once this phenomenon disappears (and the “meme stocks” go to zero), the brokerage will be in trouble. However, the newly-launched index suggests that Robinhood customers might have learned a few things about diversification. Oh, and according to the index, Robinhood customers beat NASDAQ over the period of January 2020 - July 2022 (see the chart below).

✔️ Robinhood launches investor index, tracking most-traded investments
✔️ Robinhood Unveils Index to Track Customers’ Favored Stocks
✔️ Robinhood Reveals Its Users Love Tesla, Big Tech and Meme Stocks. Go Figure
✔️ Robinhood users buy and hold companies ‘they know, understand and believe in for the long-term.’

PayPal, Shopify, and Dave Announce C-level Hires

There were several C-level hires announced this week. Hence, PayPal hired a former Expedia executive as a Chief Product Officer, Shopify hired a former Morgan Stanley investment banker as its new Chief Financial Officer, and Dave promoted its Vice President of Engineering to the Chief Technology Officer role.

Shopify's announcement got the most attention in the media with some experts concluding that hiring an investment banker suggests that the company is gearing up for acquisitions. As a reminder, in July 2022 Shopify announced laying off 10% of its workforce, as e-commerce growth started to return to the pre-pandemic levels. Pursuing acquisitions and cutting costs are very different skill sets; let’s see which skill set the company’s new CFO was hired for.

✔️ PayPal Appoints John Kim as Chief Product Officer
✔️ PayPal Hires Former Expedia Marketplace President John Kim as CPO
✔️ Shopify Hires Morgan Stanley Investment Banker as Its Next CFO
✔️ Shopify Announces Changes in Top Leadership
✔️ Dave Announces the Appointment of Chien-Liang Chou as its New Chief Technology Officer

In Other News

✔️ SoFi Announces Multi-Year Partnership with Los Angeles Chargers Quarterback Justin Herbert
✔️ Vantage West Credit Union Partners with Upstart to Offer a More Streamlined, Digital-first Borrowing Experience
✔️ SEC Chair Gensler Calls On Crypto Tokens to Come Forward and Register
✔️ SEC Will Keep the Pressure on Crypto, Gensler Warns
✔️ ‘Regulation by Enforcement’ Won’t Work for Crypto, Argues SEC Commissioner
✔️ Powell Won’t Back Down on Inflation. Get Ready for Another Big Rate Hike
✔️ ECB Lifts Interest Rates Again Keeping Pace With the Fed

Disclosure & Disclaimer: despite rocky performance in 2021 and the first half of 2022, I have open positions in most of the companies that I write about in this newsletter, as I am extremely bullish on the transformation in the financial services industry. However, none of the above is financial advice, and you should do your research.