Robinhood’s Reddit-fueled surge creates $ 20 billion market value in just two days

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Shares in hit stock trading app Robinhood continued a wild rally on Wednesday, rising by more than 80% at one point and triggering multiple trading stops on major exchanges, after a multi-million dollar investment from one of Wall Street’s most popular tech investors. bullish sentiment from traders on Reddit – and the stock’s biggest trading day yet.

Highlights

As of 2:00 p.m. EDT, Robinhood shares had climbed nearly 55% to $ 72 on Wednesday afternoon after climbing 24% on Tuesday – a staggering two-day streak that pushed the market cap to nearly $ 18 billion. from $ 57 billion.

Fueling a pre-market push, investor Cathie Wood’s ARK Invest, a leading Wall Street store that invests in “disruptive innovations” like bitcoin and Tesla, revealed he had bought nearly 90,000 Robinhood shares. – a stake worth over $ 5 million – Tuesday night.

In an email from Wednesday to Forbes, Oanda’s senior market analyst said Wood’s “big endorsement” ushered in “massive retail bets” that sent Robinhood shares up to 81% on Wednesday, as shares traded 141 million times at 2:00 p.m. – a volume surpassing when the action debuted last time. week to make Robinhood Wednesday the biggest trading day yet.

“It’s not normal for a stock of this size to move so quickly,” John Heagerty, analyst at Atlantic Equities who has a one-year price target for stocks of $ 65, said Wednesday on CNBC, warning that volatility could deter institutional investors. .

Crucial quote

“Robinhood investors welcome the return of the meme equities mania,” Moya said Wednesday, before warning: “This fervor will not last any longer, but has provided a special opportunity for Robinhood’s early investors as all other stocks even are not having a good day. ” Although they rose at the start of trading hours, shares of AMC and GameStop fell 7% and 3% on Wednesday afternoon. “We’ve seen this movie before, and this Robinhood pump and dump won’t end well for a lot of traders,” Moya added.

Tangent

In a TV interview ahead of Robinhood’s business debut on Thursday, the company’s billionaire co-founder and CEO Vlad Tenev defended the frenzied retail that took heavily-sold stocks like AMC and GameStop to sky-high heights in January and took helped Robinhood’s earnings to triple in the first quarter. “I think it’s a real thing,” Tenev said, also acknowledging the uncertainty surrounding the “ramifications of what strong retailer participation in the markets means.” When asked if he thought Robinhood could become a memes store, Tenev replied, “It’s very self-referential. No, I haven’t given it much thought.”

Key context

Robinhood’s first day of trading ended as a big disappointment for Wall Street. The stock fell more than 8% Thursday to a closing price of $ 34.82, down from the $ 38 investors paid for the shares a day earlier. Experts have warned that Robinhood’s business model is particularly sensitive to regulatory changes – a risk the company itself detailed in its IPO prospectus last month about its main revenue driver, known as payment name for the order flow and which originates from the routing of transactions from clients to market makers. for execution. “Any new regulations or prohibitions on payment for the order flow… can lead to reduced profitability, increased compliance costs and increased potential for negative publicity,” notes Robinhood. SEC Chairman Gary Gensler reiterated on Wednesday that the agency is “looking closely” at the structure of the market and said last month that paying for orders was one of the top practices under review. regulatory review.

Further reading

Robinhood co-founders $ 600 million richer today after shares rise 24% (Forbes)

Robinhood IPO: Stocks drop in early trading debut as billionaire CEO defends equity craze meme (Forbes)

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