Robinhood Shares Plunge After A Decline In Crypto Trading Hits Earnings

Topline
Robinhood shares plunged below their IPO price earlier this year after Robinhood reported third quarter earnings that were significantly below expectations due to a sharp fall in crypto trading.

After a huge revenue loss, shares of popular stock trading app plummeted. Spencer Platt/Getty Images

The Key Facts

Robinhoods stock fell nearly 10% to $36 per share on Wednesday morning. This was well below the initial $38 public offering price that it received in July. After the bell, the popular stock trading app reported earnings that were well below Wall Street expectations. Revenue dropped to $365m from $565m last quarter while net loss was $2.06 per share. This was higher than the average analyst expectation of a loss at $1.37 per shares, according to Refinitiv. This was due in large part to a sharp drop in revenue from cryptocurrency trading on Robinhoods platform. It fell 78% to $51million from the previous quarter. The company's earnings report revealed that trading activity has slowed down after a record-breaking year, which saw Robinhood benefit from a wild rally of meme stocks like GameStop, and cryptocurrencies such as Dogecoin. Robinhood's total user account count fell slightly to 22.4million, and fees related to options and stock trades declined. The company's revenue from Wall Street's high-speed trading companies, also known as payment for flow, fell 41% to $267 million last quarter.

A Big Number: Close to $500 Million

This is how much Robinhood cofounders Vlad Tenev & Baiju Bhatt lost by 11:00 AM. ET on Wednesday as shares in their online brokerage plunged. Forbes estimates that Tenev and Bhatt now have a combined value of $2.2 billion and $2.4 million, respectively.

These are the most important quotes:

After the earnings release, CEO Vlad Tenev stated that crypto activity reached record levels in the third quarter. This led to lower revenue and fewer funds. Robinhoods chief financial officers Jason Warnick said that historically, our growth has been in waves. These surges have occurred during periods of greater volatility or market events. We expect to continue to experience the ebb-and-flow of our growth as market conditions change and product launches.

What to Watch Out For

Robinhood expects that many of those same factors that impacted results in this quarter will continue to impact results through 2021. In a press release, Robinhood warned that lower retail trading activity could continue to impact fourth-quarter earnings.

Additional Reading:

Despite Robinhoods Rocky Initial Public Offering (Forbes), Each Cofounder is Now Worth Billions (Forbes).

Robinhood Billionaire Cofounders Fortunes Nearly Double in Two Days Amid Stocks Wild Rally

Robinhoods Triumph: More than a Billionaire Windfall (Forbes).

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