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Robinhood shares surge 50%, as investors scoop up 'the meme of memes'

Published 08/04/2021, 08:14 AM
Updated 08/04/2021, 09:26 PM
© Reuters. 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

© Reuters. 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

By Sruthi Shankar, Sinéad Carew and Medha Singh

(Reuters) -Shares of Robinhood Markets Inc (NASDAQ:HOOD) rose more than 50% on Wednesday during a wild trading session as investors scooped up shares after its underwhelming stock market debut last week. The online brokerage’s shares closed at $70.39, off the session high of $85 when the stock was up nearly 82%, with one analyst dubbing it "the meme of memes" in a reference to stocks popularized this year by retail investors congregating in online platforms such as Reddit's WallStreetBets.

The stock has risen far above its initial public offering price of $38 per share and has logged its fourth straight day of gains.

Its market capitalization rose to $58.8 billion, catapulting it ahead of Twitter Inc (NYSE:TWTR), restaurant chain Chipotle Mexican Grill (NYSE:CMG) and asset manager T. Rowe Price.Interest in the stock among retail investors soared on social media despite its weak market debut last week, when it fell below its IPO price. It was unclear exactly how much of Wednesday's buying was from retail investors, though. On Tuesday, retail trading volume rose tenfold, helping the stock gain 24%, according to Vanda (NASDAQ:VNDA) Research. Over the past 24 hours, Robinhood was by far the most mentioned stock on WallStreetBets according to sentiment tracker SwaggyStocks.

"We know from meme stock trading that's happened over the last several months that when there's a lot of activity on social media, sometimes that will drive a stock higher or lower,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab (NYSE:SCHW) in Austin, Texas. Wednesday marked the first day that investors could trade options on Robinhood shares, another way of betting on the stock. In recent months, options trades by retail investors have contributed to outsize moves in shares of companies like GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC) Holdings.

Some 293,000 contracts changed hands by 3:15 p.m. (1915 GMT), about evenly spread between bearish puts and bullish calls, putting it on pace for one of the most active options markets debuts ever, according to Trade Alert data.

"I am surprised by how active it is, ... but then this is the meme of memes," said Henry Schwartz, head of product intelligence at Cboe.

Contracts betting on the shares rising above $70 by Aug. 20 were the most actively traded. Puts that come into play if the stocks falls below $20 by mid-August were the next most actively traded contract.

© Reuters. 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

Implied volatility on the stock’s August options stood at around 240% -- indicating that traders expect the stock to move about 15% every day, with a greater-than-30% daily move once every 20 days, according to a note from Christopher Murphy of Susquehanna Investment Group.

Sentiment on Robinhood has also been helped by star stock picker Cathie Wood, who heads the ARK Invest asset management firm. Wood's Ark Fintech Innovation ETF bought another 89,622 shares of Robinhood on Tuesday, and the stock now amounts to about 0.9% of its portfolio, according to a summary of the fund's daily trading. Wood's flagship ARK Innovation ETF has accumulated nearly 5 million Robinhood shares. "People are trying to jump on the back of Cathie Wood's vote of confidence in Robinhood shares," said Thomas Hayes, managing member at Great Hill Capital in New York. "The catalyst was certainly Cathie Wood putting in a sizable position after everyone was downbeat after the IPO."

Latest comments

How in the world is it even possible that so much bs is spread? Aren't journalists supposed to write about the truth? Just go on Reddit (wallstreetbets, superstonk, amcstock), and read what the communities there think about robinhood! After how rh deceived them so much back in January, they hate that stock. I don't know who is buying that stock, but it is definitely not the crowd on Reddit.
I bought 3 shares for fun. Honestly HOOD saves me thousand of dollars. Before robinhood, I used to pay 15usd or more per trade. Now i can flip less than a share which was impossible,unthinkable a few years ago.
No more free credit from fed debt ceiling hit and tresuries runnin low
investors my ******** The hedge funds are buying it to make apes think rh is the new thing. Stop spreading fud with your hedge fund supported and pre written articles of fear.
lol noone is stupid enough to be dealt with rh again but what do i know !
The HYPOCRISY of this company is astounding.
grow up and act like and investor
this news is fake If you cant proof who are the buyers with how much volume
175 million volume learn to invest
It will pop. Not sure when but it will and it will be a bloodbath. Most of stocks are overvalued.
I agree alot of stock over valuedbecause to many looking for quick money n pump n dumps is hurting many but only here of ones making money by messages not stock fundamentals
grow up folks $Hood fundamentals are solid
🤣Retail my **** Vlad dumped millions of dollars worth of stock on IPO day. Pump and dump. They’re probably parking sell orders in the dark pool.
that was in the finding
The only thing this is a proof of is the fact that US stock market is a complete joke of an criminal manipulated circus and scam.
your entire article is *** Vlad  dumped HOOD in the first day and restricted the retail.
another giant ponzi - now a meme stock
I'd love to know where you've heard this "buzz" It was the most mentioned for a crime they are still under investigation. Also why did vlad and insiders flipped the stock during the IPO?
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