Shares of online brokerage declined on Thursday, after Robinhood said early investors may sell nearly 98 million shares. The company’s shares fell 27.6% to close at $50.97 a day after they jumped more than 50%. Robinhood Markets Inc went public less than two weeks ago on July 29 at $38. Its shares initially fell below the public offering price before galloping higher.
In a regulatory filing, Robinhood registered for the sale of up to 97.9 million shares by early investors and noted that the company will not receive any of the proceeds. Robinhood’s regulatory filing angered some retail investors, who groused in online forums such as Reddit’s WallStreetBets.
The potential future share sales, which rely on meeting certain stock performance were outlined in its IPO prospectus. Nevertheless, the filing may have prompted some traders to take profits after the stock’s impressive four-day run. Retail traders are closely watching the situation regarding Robinhood. It joined the ranks of so-called “meme stocks” a term applied to GameStop and other companies whose shares experienced wild trading in 2021.
On August 5, shares of Robinhood were the most traded among customers of Fidelity’s online brokerage, with buys outperforming sales. It also topped the list of the most mentioned stocks on Reddit’s WallStreetBets for the second day in a row.
Interestingly, Wednesday marked the first day that investors could trade options on Robinhood, giving them another way to bet on the stock. Options trading by retail investors helped to drive big moves in shares of GameStop as well as other stocks in 2021.
The company’s options market debut attracted a trading volume of about 323,000 contracts on Wednesday. Robinhood’s market debut was the second most heavily traded options market debut in history after Facebook.
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