El broker online, Robinhood Mkts Rg-A, is not in a good moment in the bag. After a IPO which received great interest from investors, its price falls and falls by levels of its IPO. Closing Wednesday at $ 23.72 according to Caitlin McCabe en The Wall Street Journal.
The online broker has played a central role in the retail investor frenzy over the past two years and, at last count, had more than 22 million clients with financed accounts.
A little history
Launched less than a decade ago by the co-founders Vlad Tenev and Baiju Bhatt, the company was able to grow rapidly by using an elegant user interface to attract a lot of younger investors, an age group that larger entities like Fidelity Investments y Vanguard Group historically had trouble capturing. Now that you’ve locked out that demographic, you’re having a hard time maintaining growth rate since it depends mainly on the commercial activity of the users to obtain income. And its third-quarter results fell short of analyst estimates, which weighed on stocks.
“This was never going to be a stock that moved in a linear path,” he said. Devin Ryan, Director of Financial Technology Research at JMP Securities. “There is a lot of volatility in the business model and growth is not going smoothly.”
Competition within the world of brokers is fierce, and customers every time they show less willing to pay fees. Large asset managers have been able to keep fees low while using their scale to increase revenue. They have also been successful in development of customized and specialized products with higher fees, such as funds linked to the environment.
What are your plans?
Robinhood plans to expand with other products and services in the future, including a highly anticipated large-scale launch of cryptocurrency wallets. But even as it grows, it has been haunted by potholes in the road. Recently, for example, the company revealed a hack that allowed an intruder to gain the personal information of millions of users.
How has the action been shared?
Robinhood’s shares have been extremely volatile since its debut, when banks grappled with a unusual problem in the IPO process: open the offer to clients on the same terms as institutional investors. In an unusual move, until the 25% of the IPO’s shares were allocated to Robinhood’s individual investor clients.
In seven different trading days in Robinhood’s life as a public company, shares have moved more than 10%. On consecutive days in August, stocks rose by 50% and then they fell a 28%.
Many companies that debuted on the stock exchanges this year have seen their share prices struggle and, on average, trade a 8.8% below their prices IPO. According to an analysis of Dealogic As of December 6, of the more than 380 companies that have launched IPOs in the United States this year, nearly two-thirds of those companies are trading below their offer prices.
Robinhood’s worse-than-average performance is a surprising turn of events for a company that just a few months ago seemed destined to join the ranks of the high yield stocks.
In early August, Robinhood went up to a Intraday high of $ 85 during a hectic trading day, fueled by the enthusiasm of individual investors and a flurry of betting options.
In the following months the shares have fallen, reaching a Intraday all-time low of $ 20.58 on Monday. Even after recovering in the last few days, it continues to drop a 8,6% in December.
Why this correction?
Much of the recent correction was due to its earnings report for the third quarter of October, when the company reported a 35% quarter-over-quarter drop in revenue. A slowdown in cryptocurrency trading, particularly on the meme cryptocurrency dogecoin, weighed heavily on the results. The company said it expected October-December revenue to be less than the amount posted in the third quarter.
The weeks that followed brought a Data Violation. The email addresses of approximately five million users, as well as the complete names from a different group of about two million peopleRobinhood noted.
End of IPO restrictions
The share price has recently faced technical pressures. Hundreds of millions of shares owned by early investors and employees have become fully negotiable in the last few weeks after the blocking restrictions linked to the IPO, which opens the possibility for these groups to sell their shares.
“There was a lot of potential selling pressure after a weaker quarter for the company,” said Ryan, who currently has a $ 58 stock price target. He indicated that he remains optimistic about the company’s plans, including its goal of expand to retirement accounts.
And while regulatory threats, including the possibility of cryptocurrency regulation and changes to the pay-per-order stream, from which Robinhood derives most of its revenue, continue to haunt the company, Ryan said there are other reasons for be encouraged. Their estimates show a increase in Robinhood app downloads this quarter compared to the last as the volatility of stocks and cryptocurrency trading have increased.
Robinhood closed Wednesday at $ 23.72, regaining some of the ground it has been losing.