Robinhood's stock market debut in July 2021 was a real success: The stock had a spectacular rally in the first trading days. But disillusionment soon followed. The weak quarterly reports made investors dump Robinhood shares from their portfolios. However, not all market participants share this pessimism, as was impressively demonstrated recently.
Even for seasoned stock market investors, Robinhood's chart picture is a horror. Shortly after the Initial Public Offering (IPO) on the NASDAQ technology exchange on August 4, 2021, the stock reached a record high of $85.00. However, since then, the value has continued to fall. Currently, the price is at $8.50 (as of the closing price on 14 November), which is just a fraction of the initial value. Even the attempt to stabilize this year did not last long.
In the last three months, there has been another decrease of 18.35 percent. The reason for the renewed slide in prices: The weak quarterly report for the third quarter of the year. Robinhood achieved a turnover of 467 million US dollars between June and September. Although this was more than in the same quarter of the previous year (361 million US dollars), it fell short of analysts' expectations, who had forecast a turnover of 479.5 million US dollars. The profit development was also weak. The earnings per share were 0.10 US dollars in the last quarter, while they were 0.20 US dollars in the same quarter of the previous year.
Despite Surpassing Analysts' Profit Estimates (Who Had Even Expected a Loss of 0.10 US Dollars Per Share), Robinhood's Stock Ended the Trading Day after the Release of the Quarterly Figures on November 8th on NASDAQ with a Loss of 4.29 Percent.
The latest quarterly report clarified that Robinhood is still in a severe crisis. The neobroker industry, which experienced a boom especially during the COVID-19 pandemic, is currently also becoming unstable. The initial euphoria among small investors appears to have flattened, as the high interest rates dampen risk awareness. In addition, the persistent inflation and the weak US economic situation have reduced the purchasing power of potential investors.
The consequence: Robinhood is not achieving the expected revenue growth, while trading volumes and user numbers stagnate or even decline. In response to the lower revenues, the US neobroker cut hundreds of jobs. Nevertheless, Robinhood does not seem to want to give up - on the contrary: As part of the quarterly report, the company announced that it is planning an expansion to Europe in the coming weeks. Currently, Robinhood is considering setting up brokerage activities in the United Kingdom.
Investors reacted to the perceived worse growth prospects of the neobroker industry and sold relevant stocks, which affected not only Robinhood but also the crypto-brokerage company Coinbase. However, there is a well-known investor who is not at all pessimistic when it comes to the future of Robinhood: Cathie Wood. The day after the quarterly announcement, on November 8, 2023, the infamous US tech investor bought a significant share package of Robinhood. According to "Cointelegraph", Wood purchased a total of 1.1 million shares for about 9.5 million dollars on that day.
The purchase was made through three innovation funds (ETFs) managed by ARK, namely ARK Innovation ETF (ARKK), ARK Next Generation Internet ETF (ARKW) and ARK Fintech Innovation ETF (ARKF). ARKK was responsible for the purchase of 888,500 Robinhood shares (78 percent of the total purchase), while ARKW and ARKF acquired 152,849 shares and 99,697 shares respectively.
This bold purchase of Robinhood shares by Wood is not an isolated case. Over the past few months, the 67-year-old investor has often used the company's price weakness and regularly increased her stake. However, the purchases were usually smaller. On October 22, for example, ARK bought 259,628 Robinhood shares, and on the following trading day, another 197,285 shares for its ARKW funds. Whether the Robinhood shares will ultimately achieve their upswing and Woods' multiple repurchases pay off remains to be seen.
