'Ghost town' fears send Robinhood sliding as trading frenzy fizzles
FILE PHOTO: The logo of Robinhood Markets, Inc. is seen at a pop-up event on Wall Street after the company's IPO in New York City, U.S., July 29, 2021. REUTERS/Andrew Kelly
Shares of Robinhood Markets Inc fell 12per cent on Thursday as the fee-free broker's warning about a slowdown in trading raised concerns about its reliance on a pack of small-time investors to sustain a frenzy in stocks, options and cryptocurrencies.
In its first results as a public company on Wednesday, Robinhood said the crypto trading mania this year helped double its second-quarter revenue, but also warned it expected retail investors who trade on its popular app to take a breather in the third quarter.
"Robinhood is dependent on high volatility and you don't get high levels of volatility all the time," said David Madden, market analyst at Equiti Capital.
"It comes in spurts and it can just be a ghost town for months and months."
Dogecoin, a meme-inspired cryptocurrency that made up 62per cent of Robinhood's total crypto volumes in the second quarter, has catapulted around 9,000per cent in value in the past year.
Bitcoin, the world's biggest cryptocurrency, is up 52per cent in 2021, but Refinitiv data shows trading volumes have declined in every month since May.
Robinhood's own stock has been dubbed the "meme of memes" after it rallied like meme stocks GameStop Corp and AMC Entertainment.
Robinhood shares closed 8per cent lower in their market debut on July 29, before more than doubling to US$85 through the first week of August on interest from both individual traders and star investor Cathie Wood.
The stock was down 9per cent at US$45.11 by 8:18 a.m. ET on Thursday and was among the top 20 most-traded stocks across U.S. exchanges.
Social media chatrooms were abuzz with activity as users reacted to the company's warning.
"I wouldn't buy this. (Too) many red flags. If you made money, good, but this will never go to US$80 again," a Stocktwits user wrote on the trading-focused social media site, tagging Robinhood's ticker US$HOOD.
Message volume related to Robinhood spiked by nearly 36per cent on Stocktwits, with positive and negative sentiment toward the stock split evenly.
Robinhood also said it was considering selling branded merchandise, in a move similar to AMC, which has floated the possibility of selling products from theaters.
(Reporting by Sruthi Shankar and Medha Singh in Bengaluru; Editing by Saumyadeb Chakrabarty and Sagarika Jaisinghani)
