Robinhood shares surge 80% amid frantic trading


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The shares in Robinhood, a trading platform have surged. 

This happened even though there was an assumption that the firm could be seeing the same frantic trading that surrounded the video game retailer Gamestop.

On Wednesday the shares rose as much as 82%. Trading was also paused several times due to wild price swings.

It follows a lacklustre stock market debut for the firm, which is popular with young investors but debatable.

Whereas, some major investors rejected the company for being too risky.

Robinhood follows a commission-free trading policy that has proved to be very popular with amateur traders during the lockdown.

Moreover, the number of account holders has doubled to 31 million since January.

But last Friday the firm faced disappointment as its shares jumped on their first day of trading, ending the day at around $36.

However, on Wednesday the stock rose as high as $85 before falling back.

It meant that at points Robinhood was worth more than famous blue-chip companies such as Kraft Heinz and Ford.

Part of the reason, analysts believe, is that in line with its mission to “democratise finance” the firm has put around a third of its stock into the hands of everyday retail investors – an unusual move on Wall Street.

Now it seems that hyperactive trading by these investors is causing a rise in the price.

It has echoes of the Gamestop saga in March, which saw users of the social media platform Reddit buy up shares in the games retailer to drive up the price.

According to research firm SwaggyStocks – Robinhood was by far the most mentioned stock over the past 24 hours on WallStreetBets, the Reddit thread at the centre of the Gamestop rally.

Dan Ives, an analyst at Wedbush Securities, told the BBC:

“This speaks to massive retail interest in this name at the moment and is an eye popping move for Robinhood that reminds investors of the ‘meme stock’ phenomenon.”

A vote of confidence in Robinhood by star stock picker Cathie Wood, who heads the Ark Invest asset management firm, has also helped sentiment.

On Tuesday the company increased its holding in the shares of Robinhood by 89,622. Now the stock amounts to about 1% of its portfolio.

It comes after many institutional investors shunned Robinhood’s initial public offering over fears it could face a regulatory crackdown.

The platform has faced criticism for exposing amateurs to risky products such as meme stocks and cryptocurrencies.

In June, it was fined $70m by a US regulatory body that said it harmed thousands of consumers through “false and misleading” communications.



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