Robinhood stock trading app suspends trading in its own shares

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9to5Mac 04 August, 2021 - 09:17am 19 views

What is a meme stock?

Meme stocks are the shares of companies that have seen a recent surge in viral activity, which is usually fuelled by online social media platforms such as Reddit and Twitter. The buzz over a particular stock prompts retail traders to buy the stock with the knowledge that its share price will likely rise. CMC Markets5 Booming Meme Stocks to Watch in 2021

We explained back in January what was happening at the time.

GME was one of several stocks whose value shot up when a bunch of Reddit users entered into a coordinated buying spree.

Any significant increase in demand for a stock tends to push the price up, but there was an extra factor in this case. The Redditors had chosen stocks whose prospects were extremely poor, GameStop being a case in point: a retailer of physical games media in an already declining market, further hit by a pandemic.

There was method in this apparent madness. When a stock is in decline, investors will often “short” the stock. This means they borrow stock to immediately sell it. They then wait for the price to fall, buy the stock for less than their selling price and return it to the owner, pocketing the difference. More specifically, the coordinated action made heavy use of options, as this lets you get more bang for your buck.

These options have an expiry date, however, and if the price goes up instead of down, they are forced to buy the stock at a higher price, taking a loss. If the price is rising rapidly, then all the shorters will pile in to buy the stock in order to minimize their losses, and that buying frenzy pushes the price higher. It then becomes a vicious circle known as a “short squeeze.”

Robinhood responded by suspending trading in the stocks, but was accused of doing so to protect the hedge funds to whom it sold trading data – which prompted both SEC and Congressional investigations.

Trading limits in the stocks concerned were eventually removed, but there was one more to come …

Robinhood itself went public, and trading in its own stock was temporarily halted after rising more than 60% in less than a day. TechCrunch reports.

Trading of Robinhood shares has been halted due to volatility. The company’s stock paused at $65.60 on Robinhood itself. Yahoo Finance has a higher $77.03 price on the company’s equity, up a stunning 64.59% today. Things are fluid, but Robinhood may have been halted, and then rose again when it resumed trading […]

Recall that Robinhood went public at $38 per share, the low end of its range, and sank in its early trading sessions to below its IPO price. Now, it’s worth $54 per share.

The sharp rise appears to be for the same reasons: belief that large investors were shorting the stock due to its poor initial performance, but the NY Post says that some experts dismiss this.

“There’s not nearly enough short interest to affect a stock price that significantly,” Ihor Dusaniwsky of S3 Partners told The Post. “This is a long buying not a short covering rally.”

FTC: We use income earning auto affiliate links. More.

Ben Lovejoy is a British technology writer and EU Editor for 9to5Mac. He’s known for his op-eds and diary pieces, exploring his experience of Apple products over time, for a more rounded review. He also writes fiction, with two technothriller novels, a couple of SF shorts and a rom-com!

Read full article at 9to5Mac

Robinhood surges as much as 81%, gets halted for volatility

CNBC Television 04 August, 2021 - 11:20pm

By Lydia Moynihan

Robinhood’s surging shares were repeatedly halted on Wednesday after a massive spike, with some investors speculating that its dizzying rally is being driven by anticipation of a short squeeze.

Moments after the opening bell on Wednesday, the stock climbed as high as $85 — up a staggering 81 percent from Tuesday’s closing price of $46.80 and briefly giving the company a market capitalization of more than $71 billion. That’s pricier than Intercontinental Exchange, which owns the New York Stock Exchange.

Robinhood shares finished the day up 50 percent at $70.39.

The rally marked a stunning turnaround for the stock, which last week had sunk more 10 percent in a disappointing IPO before finishing its first trading session below $35 a share.

Wednesday was the first day that investors can buy put and call options for Robinhood — and some market watchers saw that as the key reason the stock surged higher despite a lack of news. Buying one call option gives traders the option to buy multiple shares of the stock at a certain price, and issuance of those options can push demand for stocks higher.

“The availability of call options is adding to the surging price — exacerbating the hyperbolic move in the stock,” Tim Anderson, managing director at TJM Investments told The Post.

Others think the increased buying could partly be a copycat trade. Controversial stock picker Cathie Wood, who runs Ark Invest, has snatched up millions of HOOD shares during the past few days — and acolytes could be following in her footsteps.

With this week’s dramatic jumps, the app that helped give rise to super-volatile meme stocks like GameStop and AMC has become a meme stock itself. Between Tuesday and Wednesday afternoon, Robinhood was mentioned 1897 times on Reddit’s WallStreetBets forum — compared with just 212 mentions of AMC, according to data from Quiver Quant.

On Tuesday, the HOOD rally was partly led by retail traders – “retail volumes experienced a tenfold increase relative to Monday” according to a report from Vanda Research.

 Every quarter there’s a new meme,” Ihor Dusaniwsky of S3 Partners told The Post. “Robinhood is the summer blockbuster.”

Still, the tremendous volatility has a downside. Institutional investors are paying close attention to retail investors – and many are betting their trades could come crashing down.  

Even as ‘HOOD’ reaches fresh highs, experts say all signs point to Robinhood being one of the most popular targets for short sellers. The stock borrow rate — how much it costs to borrow a stock and short it — is trading at unusually high levels. Typically, the borrow rates to short a stock is 0.5 percent. For Robinhood, the rate is 40 percent to 90 percent, according to S3.

At a 90-percent stock borrow fee, short sellers need HOOD’s stock price to drop more than 7.5 percent over the next month and 22.5 percent over the next three months just to break even.

“It’s extraordinarily rare for rates to be this high,” Dusaniwsky adds. “And that’s only if you can get the shares.”

More comprehensive Robinhood short data is expected in the coming days.

Meet the new meme stock: Robinhood soars 82%

CNN 04 August, 2021 - 11:20pm

Shares of Robinhood spiked as much as 82% early Wednesday — even though the controversial trading company, which debuted on Wall Street just last week, announced no new developments.

Robinhood rallied so much that trading was halted multiple times for volatility. In recent trading, Robinhood was up a more modest 30%.

The frenzy comes after Robinhood finished 24% higher on Tuesday, finally breaking above its initial public offering price of $38.

Robinhood is suddenly garnering huge amounts of interest from retail investors — including WallStreetBets, the army of traders behind the GameStop surge of earlier this year.

"Robinhood engineered itself to be a meme stock from the get-go," said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. He pointed to how Robinhood took the unusual step of selling a large chunk of its shares to users and opened its road show up to the public.

"When that happens, we should absolutely expect eye-watering price moves on any given day, without any news," Gokhman said.

Robinhood is easily the most-talked about stock over the last 24 hours on WallStreetBets, according to Swaggy Stocks, which tracks mentions on the Reddit page. Robinhood accounted for more than one-quarter of all ticker mentions on WallStreetBets.

Thinknum Alternative Data, which tracks WallStreetBets mentions for hedge funds and banks, found that Robinhood's mention volume is twice as high as that of AMD (AMD), the second-most mentioned stock on the page.

Reddit's focus on Robinhood is "quite astonishing," said Justin Zhen, Thinknum's co-founder and president, adding that "what is interesting is a lot of the sentiment is actually negative."

Against this backdrop, retail trading volume climbed tenfold on Tuesday, Reuters reported, citing Vanda Research.

Robinhood is also benefiting from an endorsement from a closely watched fund manager. Cathie Wood's Ark Innovation ETF (ARKK) has revealed significant and growing purchases of Robinhood in recent days.

"A lot of retail investors put their faith in Cathie and see her as their field general," said Gokhman.

All of this is in stark contrast with Robinhood's rocky start to life as a public company.

Robinhood priced its IPO at the low end of expectations and then swiftly fell sharply after it began trading on the Nasdaq last week. The stock ended its first day down 8%, failing to score the first-day pop that new companies covet.

More than any other company, Robinhood has benefited from a surge in retail trading volumes. Robinhood's revenue surged 245% to nearly $1 billion last year as its user growth rose sharply.

Robinhood has also benefited from the meme stock phenomenon, in which GameStop (GME), AMC (AMC) and other consumer-facing companies have been driven sharply higher despite little changing fundamentally.

However, Robinhood did not appear to be very popular with traders on Reddit ahead of the IPO. Commentary on the site's popular WallStreetBets forum indicated many individual traders are angry with Robinhood, and some even threatened to short it.

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Robinhood surges 50% in second day of wild trading, up 100% this week

CNBC 04 August, 2021 - 11:20pm

Shares of Robinhood spiked as much as 82% early Wednesday — even though the controversial trading company, which debuted on Wall Street just last week, announced no new developments.

Robinhood rallied so much that trading was halted multiple times for volatility. In recent trading, Robinhood was up a more modest 30%.

The frenzy comes after Robinhood finished 24% higher on Tuesday, finally breaking above its initial public offering price of $38.

Robinhood is suddenly garnering huge amounts of interest from retail investors — including WallStreetBets, the army of traders behind the GameStop surge of earlier this year.

"Robinhood engineered itself to be a meme stock from the get-go," said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. He pointed to how Robinhood took the unusual step of selling a large chunk of its shares to users and opened its road show up to the public.

"When that happens, we should absolutely expect eye-watering price moves on any given day, without any news," Gokhman said.

Robinhood is easily the most-talked about stock over the last 24 hours on WallStreetBets, according to Swaggy Stocks, which tracks mentions on the Reddit page. Robinhood accounted for more than one-quarter of all ticker mentions on WallStreetBets.

Thinknum Alternative Data, which tracks WallStreetBets mentions for hedge funds and banks, found that Robinhood's mention volume is twice as high as that of AMD (AMD), the second-most mentioned stock on the page.

Reddit's focus on Robinhood is "quite astonishing," said Justin Zhen, Thinknum's co-founder and president, adding that "what is interesting is a lot of the sentiment is actually negative."

Against this backdrop, retail trading volume climbed tenfold on Tuesday, Reuters reported, citing Vanda Research.

Robinhood is also benefiting from an endorsement from a closely watched fund manager. Cathie Wood's Ark Innovation ETF (ARKK) has revealed significant and growing purchases of Robinhood in recent days.

"A lot of retail investors put their faith in Cathie and see her as their field general," said Gokhman.

All of this is in stark contrast with Robinhood's rocky start to life as a public company.

Robinhood priced its IPO at the low end of expectations and then swiftly fell sharply after it began trading on the Nasdaq last week. The stock ended its first day down 8%, failing to score the first-day pop that new companies covet.

More than any other company, Robinhood has benefited from a surge in retail trading volumes. Robinhood's revenue surged 245% to nearly $1 billion last year as its user growth rose sharply.

Robinhood has also benefited from the meme stock phenomenon, in which GameStop (GME), AMC (AMC) and other consumer-facing companies have been driven sharply higher despite little changing fundamentally.

However, Robinhood did not appear to be very popular with traders on Reddit ahead of the IPO. Commentary on the site's popular WallStreetBets forum indicated many individual traders are angry with Robinhood, and some even threatened to short it.

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Robinhood Stock Is Hot for All the Wrong Reasons

InvestorPlace 04 August, 2021 - 11:20pm

Shares were halted for volatility in the first few minutes of the trading session on Wednesday. The stock soared more than 80% at one point. The upward move comes a day after the stock spiked 24%. The stock price blew past its IPO price of $38 on Tuesday in stark contrast to its public debut last week. 

Retail interest could be a contributing factor for the upward move. Robinhood is one of the most mentioned stocks on Reddit's WallStreetBets, according to SwaggyStocks. The stock's comment volume has spiked over the last two days. 

On Wednesday Fidelity's real time order data was showing Robinhood as a top traded stock, behind Advanced Micro Devices (AMD) and AMC (AMC), two stocks followed by WSB members.

While short squeezes have often initially driven up "meme" stocks in the past, Robinhood's move is not driven because of a short covering. "While there is some short side activity in HOOD, it is the long side which is main driver of its stock price volatility," Ihor Dusaniwsky of S3 Partners told Yahoo Finance.

"The upward stock price pressure in HOOD is not a short squeeze for the simple reason that there has not been enough time for a large short position in HOOD to be accumulated," he added.

High profile investments in Robinhood may also be driving the price higher. Last week Cathie Wood's Ark Innovation ETF (ARKK) scooped up about 4.9 million shares of Robinhood, according to Bloomberg data. 

Investors are keeping a close eye on the stock following Robinhood's public debut last Thursday. 

The stock sank as much as 12% below its IPO price during its first day of trading on the Nasdaq. Shares closed down 8% that day. Some questioned whether its lackluster performance had anything to do with Robinhood's hybrid auction-style debut, a lack of lock-up period for 15% of shares held by employees and others, or concerns over regulatory headwinds.

Robinhood has been a key player in the retail trading boom involving GameStop (GME) and other stocks over the past year-and-a-half. In an unusual move, the company allocated about 35% of its shares to retail investors for its IPO.

The options market shows some investors are betting against an upward movement in the stock. Puts expiring August 20th outnumbered calls during the first day of options trading on Robinhood, according to Bloomberg data. 

Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre

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Robinhood soars again with its stock doubling in 4 days after rocky IPO

Daily Mail 04 August, 2021 - 11:20pm

Robinhood's stock flew on Wednesday, soaring by as much as 82%, nearly a week after its rocky initial public offering that saw its shares plunge 8.4% in the worst-ever debut for a company of its size. 

The company that helped fuel the GameStop stock phenomenon, with its easy-to-use app, finished trading on Wednesday at $71.17 per share.

That means it has more than doubled in value in four days, generating a total of $20billion in market value.

Robinhood ended trading Wednesday 50.4% above the previous day in a rally that was so feverish that trading was temporarily halted three times in the first half hour after the market opened. 

It's a sharp turnaround from last week's lackluster debut for the stock, when it sank 8.4% from its initial price of $38 on Thursday.

The company's app has made it a hit among young investors trading from home on cryptocurrencies and stocks such as GameStop Corp during the COVID-19 pandemic. At one point, for instance, GameStop's shares soared more than 1,700 percent. 

The company's stratospheric showing on Wall Street Wednesday came after a successful day of trading Tuesday, in which it ended 24% higher at $46.80 per share, going above its debut price for the first time.     

Even ahead of its initial public offering, experts warned that Robinhood's stock could be primed for a more jagged ride than others on Wall Street because of its popularity among smaller investors.

'Robinhood engineered itself to be a meme stock from the get-go,' Max Gokhman, head of asset allocation at Pacific Life Fund Advisors told CNN

Robinhood reserved a bigger-than-usual chunk of its IPO shares for smaller investors, which fits with its mission of 'democratizing finance.' 

The company has introduced a new generation of younger and novice investors to the stock market, thanks to its zero-trading fees and easy-to-use app. 

But the move also gave fewer shares to big institutional investors, who have a reputation for being steadier holders of stock for the long term.

'When that happens, we should absolutely expect eye-watering price moves on any given day, without any news,' Gokhman said. 

Robinhood has found support from some big names on Wall Street. 

Cathie Wood, a star stock picker who focuses on innovative companies, has bought shares, for example. 

Her flagship ARK Innovation exchange-traded fund owns nearly 4.9 million shares, making Robinhood the fund's 29th largest holding. 

The fund has about $25.5 billion in total assets, and its pre-market investment of 90,000 shares - worth more than $5million - Tuesday night, helped in part fuel Wednesday's surge, according to Forbes.

Outside of that, though, analysts were grasping for explanations for the surge in the stock. 

For some, it was reminiscent of the explosive moves higher for GameStop and other 'meme stocks' such as AMC earlier this year.

Those stocks soared suddenly to heights that professional investors called irrational. 

Many were beaten-down companies in the midst of a turnaround, and they caught waves of interest from smaller-pocketed investors who egged each other on in online forums such as Reddit to buy more.

Robinhood has created plenty of passion, among users and critics alike, and the polarizing effect has shown in its wild, short time on Wall Street. 

After opening at $38 last week, it fell to $34.82 in its first day of trading. On Wednesday morning, it briefly touched $85.

Robinhood is already delivering the strong growth that Wall Street is always hungry for: Revenue soared 245% last year to $959 million. 

The company was founded in 2013 by Stanford University roommates Vlad Tenev and Baiju Bhatt. The two will hold a majority of the voting power, with Bhatt keeping around 39% of the outstanding stock and Tenev about 26.2%. 

It has amassed an estimated 22.5 million funded accounts since its founding, as customers trade everything from stocks to options to cryptocurrencies. 

With the IPO, both Tenev and Bhatt are now billionaires, at least when it comes to their paper holdings: The Bloomberg Billionaires Index valued Tenev's holdings at $2.4 billion and Bhatt's at $2.8 billion. 

Tenev told the Associated Press that the company wants to be 'the single money app - the most trusted and culturally relevant money app worldwide.'

'So, everything that you use your money for, you should be able to do through Robinhood,' he said. Among them, he said, were direct deposits of paychecks and paying bills online.

He also pushed back on criticism that Robinhood is making the stock market a casino by encouraging its customers to trade more often.

Critics say Robinhood encourages unsophisticated investors to make trades too often that may be too risky, and regulatory scrutiny is likely to stay high. 

'I think it´s a big, big mischaracterization because if you look at it, the stock market has been one of the greatest wealth creation tools,' he said. 'We should be encouraging access to it and not denigrating people that are able to use it. So in a sense, you're hearing when wealthier customers are engaging in the stock market, it's investing. But when the rest of us are accessing the stock market, it's gambling.'   

But Robinhood has also paid more than $130 million in recent years to settle a long list of accusations by regulators. 

Some users are also still angry at Robinhood and other brokerages for temporarily barring them from trading shares of GameStop and other meme stocks early this year. But as its performance this week has suggested, Robinhood may be turning into something of a meme stock itself.

'I hate Robinhood, but I got in and made $1k in 20 minutes,' said one user on Reddit's WallStreetBets forum, a central hub for the explosion of meme stocks this year.

Baiju Bhatt and Vladimir Tenev founded Robinhood in 2013, saying they were inspired by the Occupy Wall Street protests. 

Robinhood is a free stock trading app that allows users to easily load cash and buy and sell stocks and options.

The popular app boasts 13 million users, and reportedly about half of them own shares of GameStop.

On January 28, Robinhood restricted the purchase of shares in GameStop and several other stocks popular on the Reddit forum WallStreetBets.

Traders who own the stocks were still able to hold or sell them on Robinhood, but no users were allowed to purchase new shares.

The move drew furious condemnation across the political spectrum, and accusations that Robinhood is coming to the aid of hedge funds at the expense of small investors. 

Legal experts say brokerages have broad powers to block or restrict transactions.

Bhatt and Tenev met while they were students at Stanford University, and had previously collaborated to start a high-frequency trading firm and a company selling software to professional traders. 

The SEC ruled that Robinhood had misled its customers about how it was paid by Wall Street firms for passing along customer trades and that the start-up had made money at the expense of its customers. 

Robinhood agreed to pay a $65 million fine to settle the charges, without admitting or denying guilt. 

Bhatt, 36, is the son of Indian immigrants, and earned a bachelor's degree in physics and master's in mathematics from Stanford.

Tenev, 34, was born in Bulgaria and moved to the US with his family when he was five. He earned a bachelor's in mathematics from Stanford and dropped out of a PhD program to team up with Bhatt. 

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Robinhood shares surge amid frenzied trading

BBC News 04 August, 2021 - 11:20pm

The stock climbed as much as 82% on Wednesday, with trading paused several times due to wild price swings.

It follows a lacklustre stock market debut for the firm, which is popular with young investors but controversial.

Some bigger investors have shunned the company for being too risky.

Robinhood's commission-free trading has proved hugely popular with amateur traders during lockdown, with the number of account holders doubling to 31 million since January.

However, it faced disappointment last Friday when it's shares dived on their first day of trading, ending the day at around $36.

On Wednesday, though, the stock rose as high as $85 before falling back. It meant that at points Robinhood was worth more than famous blue chip companies such as Kraft Heinz and Ford.

Part of the reason, analysts believe, is that in line with its mission to "democratise finance" the firm has put around a third of its stock into the hands of everyday retail investors - an unusual move on Wall Street.

Now it appears frenzied trading by these investors is pushing up the price.

Robinhood was by far the most mentioned stock over the past 24 hours on WallStreetBets, the Reddit thread at the centre of the Gamestop rally, according to research firm SwaggyStocks.

Meanwhile retail trading in Robinhood shares was up tenfold on Tuesday, according to Vanda Research.

Dan Ives, an analyst at Wedbush Securities, told the BBC: "This speaks to massive retail interest in this name at the moment and is an eye popping move for Robinhood that reminds investors of the 'meme stock' phenomenon."

A vote of confidence in Robinhood by star stock picker Cathie Wood, who heads the Ark Invest asset management firm, has also helped sentiment.

The firm increased its holding in Robinhood on Tuesday by 89,622 shares, and the stock now amounts to about 1% of its portfolio.

It comes after many institutional investors shunned Robinhood's initial public offering over fears it could face a regulatory crackdown.

The platform has faced criticism for exposing amateurs to risky products such as meme stocks and cryptocurrencies.

In June, it was fined $70m by a US regulatory body that said it harmed thousands of consumers through "false and misleading" communications.

The lawsuit accuses companies of fuelling bloodshed through negligent business practices.

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