Robinhood Markets Inc jumped 82 per cent on Wednesday after a wave of individual investors joined the likes of Cathie Wood to pile on the zero-fee trading platform.
The stock traded as high as $85 (€72) earlier in New York before cutting gains roughly in half as the volatility triggered at least three trading halts. The frenzied share buying pushed the company’s market value to a peak of $65 billion from $29.1 billion after its debut on Nasdaq last week.
Retail investors’ participation took off in the past couple of sessions after a lukewarm reception. They bought a net $19.4 million worth of Robinhood shares on Tuesday to make it the sixth-most-purchased stock and 11th-most-traded security on retail platforms, according to data compiled by Vanda Securities Pte.
Total retail volume on Tuesday surged about 10-fold from the previous day, the data show. In the first hour of Wednesday’s session more than 62 million shares changed hands, more than seven-times what was seen in recent days.
Trader chatrooms, such as those on StockTwits, and Twitter feeds were aflame with mentions of Robinhood’s surge. Users compared the surge to the massive rallies staged by so-called meme stocks like GameStop Corp and AMC Entertainment Holdings Inc. earlier this year.
The stock was the most traded company on Fidelity’s platform with more than 14,000 buy orders coming from customers. That’s more than three times the number of buy orders seen for General Motors Co. which saw the second largest number of buys.
The retail investors trading boost came alongside Ark Investment Management’s move to increase stake in the company. Ark Fintech Innovation ETF bought 89,622 Robinhood shares in the previous session as they surged 24 per cent to close at $46.80 apiece.
Some traders pointed out that partial options trading data for the company were coming through for the first time. The most actively traded options on Robinhood in Wednesday’s session was $70 calls that expire on August 20th. A company can not have options traded on its stock until at least three days after its IPO, and options activity may increase share price volatility.
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.
When it went public, Robinhood reserved a chunk of its equity for purchase by its own users. The impact of this was that more retail investors likely owned Robinhood equity at the start of its trading life than would be normal with a traditional IPO.
One hypothesis regarding Robinhood’s somewhat slack early trading performance was that early retail demand for its shares was sated by its effort to allow its users to buy stock in its shares, leading to a less-skewed supply/demand curve when it debuted.
An analyst put a $65 per share price target on the stock. And there are a handful of other ratings to chew on. But the wild swing in the price of Robinhood today appears from our vantage point to be another stonk moment. The stock is being traded like a short-squeeze, even if some market participants are skeptical of the idea due to what they view as a limited short interest in the company.