Robinhood’s volatile ride since its initial public offering last week continues.
Shares of the upstart brokerage tumbled 27.6% to $50.97 Thursday, erasing roughly half of the 50% gain the stock posted just one day earlier.
Robinhood’s latest decline came on the heels of a regulatory filing in which many early investors from the company’s fundraising in February filed for the right to sell up to nearly 98 million shares in the company—half of which can be sold now and the other half later this month. Among them were entities affiliated with New Enterprise Associates, Index Ventures, and Andreessen Horowitz. In an earlier filing, Robinhood had warned that investors could pursue this path as soon as the completion of its IPO. But, with little information specifically saying which investors would sell and when, public investors were spooked Thursday, David Erickson, a long-time investment banker, told Fortune.
“What’s dragging down the stock, and this often happens when you have a filing like this, is the uncertainty,” said Erickson, who is now a senior fellow at the University of Pennsylvania’s Wharton business school.
Even with Thursday’s drop, though, Robinhood shares, trading under the ticker “HOOD,” are still up 34% from the IPO a week ago.
The volatility has come as many on Wall Street and Main Street still look to make sense of what some are calling the latest meme stock. Retail investors have recently gobbled up shares, while the likes of Cathie Wood, Ark Invest’s prominent CEO, are helping buoy the stock among institutional investors. Wood’s Ark has collectively bought up more than 115 million shares of Robinhood, as of Aug. 5.
Like GameStop and AMC Entertainment, Robinhood is shaping up to be a hot target for short sellers—investors who bet the stock will drop—once the amount of stock available to short increases. But Steven Chubak, a veteran Wall Street analyst covering the brokerage space for Wolfe Research, wrote in a report Thursday that the firm “cannot in good faith recommend investors get involved in HOOD on either the long or short side.”
In the report, entitled “Do Not YOLO This Stock”, a warning against adopting an aggressive “you only live once” investment strategy, Chubak initiated coverage of Robinhood with a price target of $45, well below Thursday’s closing price.
