When Robinhood (NASDAQ:HOOD) debuted on the stock market, shares topped around $40 only to fall to a low of $33.35 shortly thereafter. It ended last week with a market cap of $29 billion.
After starting in 2013, Robinhood grew dramatically by user count and assets. It earned the valuation post-IPO. Yet a sharp drop-off in trading volume will shake out the weakest trading apps. Investors could buy Futu Holdings (FUTU), bank stocks with a discount brokerage arm, or Schwab (NYSE:SCHW) to get better value.
Robinhood’s rise depended on Reddit’s r/WallStreetbets sharing gains and loss screen captures. By January, when the firm disallowed buying of GameStop stock, it betrayed its users. Long-time users will quit the app and avoid HOOD stock. They may even short-sell shares on a different platform.
Robinhood irreversibly damaged its brand name in Q1. Risks are rising that more users will exit the platform. Those that stay may lose interest in speculative trading. The Nasdaq broke down in February and SPACs followed. Speculators tried to recharge meme trading in June only to fail.
In the last two weeks, the Nasdaq fell by over 1% at least one day a week. Confidence is waning. The increased bearishness will hurt Robinhood’s daily trading activity and assets managed.
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