Robinhood trading app shares took a major plunge on Thursday, falling 27.6% to $50.6. This fall comes just a day after the share prices had risen by a whopping 50%. Experts believe that the fall was precipitated by a regulatory filing by some investors asking for the rights to sell almost 98 million shares of the company. The investors who had been part of Robinhood’s fundraising round in February want half of these 98 million shares to be put up for sale immediately, and the rest will be put on sale later this month. Index Ventures, New Enterprise Associates, and Andreessen Horowitz are some of the biggest names in the list of investors.
David Erikson, a veteran investment banker, believes that despite Robinhood warning about such a move earlier, traders still panicked as soon as news of the filing leaked. Traders were unsure about which investors would sell how many shares and when and this confusion led to share prices plummeting.
But despite this huge drop in prices, Robinhood’s HOOD shares are still 34% above their original IPO price. Bankers who are unable to explain Robinhood’s volatility prices are calling it a meme stock. Retail investors, as well as institutional investors, are all keeping Robinhood stock prices high. Institutional investor Wood’s Ark has alone bought out 115 million Robinhood shares.
Robinhood is at present very popular among short stock investors. But reputed Wall Street brokerage firm executives claim that they would not recommend their clients to invest in Robinhood either on the long side or the short side.
But despite lots of confusion and volatility, Robinhood stocks are still going strong. Just this week alone, Robinhood has been able to sell $100 million worth of shares through retail purchases. Of course, only time can tell whether Robinhood will ultimately be able to live up to investor expectations.