Robinhood shares drop as company warns trading activity will slow
Robinhood’s stock tumbled more than 10 percent after the free stock-trading app warned a trading frenzy that powered its latest quarterly results appears to be waning.
The Silicon Valley-based company said its second-quarter revenue more than doubled to $565 million — but mostly because of an explosion in crypto trading, a famously volatile space that could slow or face a regulatory crackdown at any time.
“We expect seasonal headwinds and lower trading activity across the industry to result in lower revenues and considerably fewer new funded accounts than in the prior quarter,” Robinhood said in a Wednesday statement.
Robinhood shares — which spiked 81 percent in a single day earlier this month just a week after the company went public, putting them in the category of volatile “meme stocks” like GameStop and AMC — ended the day down by $5.11, at $44.69.
Market watchers were likewise spooked on Thursday after the Federal Reserve suggested a day earlier it may reduce the pace of its bond buying sooner than anticipated. Meanwhile, a deluge of stimulus checks — which fueled much of the retail buying during the pandemic — has ended for the foreseeable future.
“It’s going to be a lot harder for people to make money on short term trades,” Tim Anderson, managing director at TJM Investments told The Post. “And Robinhood may suffer.”
Still, some investors note the stock is trading almost 20 percent higher than its IPO price of $38 per share.
Robinhood said it lost $502 million, or $2.16 per share, in the second quarter, swinging from a year-earlier profit, blaming $528 million in costs and liabilities associated with convertible notes and warrants it took out to hedge against market volatility..
Meanwhile Dogecoin, the joke cryptocurrency popularized by Elon Musk that claims a Shiba Inu dog as its mascot, accounted for 62 percent of Robinhood’s cryptocurrency-based revenue in the second quarter.
“If demand for transactions in Dogecoin declines and is not replaced by new demand for other cryptocurrencies available for trading on our platform, our business, financial condition and results of operations could be adversely affected,” Robinhood said in a filing late Wednesday.
This isn’t the first time Robinhood has weathered a storm.
The popular trading app — which has been used by legions of rookie investors in this year’s “Reddit Rally” — has previously conceded that trading could slow.
In an amended prospectus the company filed before going public in July, Robinhood signaled it expects to report a slowdown in trading revenue and new clients — “particularly in cryptocurrencies.”
Overall, it has been a bumper year for the company that saw its number of accounts more than double. The Menlo Park, Calif.-based company estimates it now has almost 22.5 million funded accounts, up from 9.8 million a year ago.