Author: Maggie Fitzgerald

HOOD – Robinhood surges 10%, runs past $38 IPO price

Vlad Tenev, CEO and co-founder Robinhood Markets, Inc., is displayed on a screen during his company’s IPO at the Nasdaq Market site in Times Square in New York City, U.S., July 29, 2021.
Brendan McDermid | Reuters

Shares of Robinhood surged on Tuesday, pushing the newly public stock trading app well above its IPO price of $38 per share last week.

Robinhood went public last Thursday on the Nasdaq under ticker HOOD. The stock priced at $38 per share, the low end of its offering range. It opened at that price on Thursday but then fell 8% on its first day and has largely traded below that price, until Tuesday.

Robinhood’s stock last traded at $44.00 per share, up 17% on Tuesday.

Bulls love Robinhood for its massive growth, especially during the pandemic and GameStop trading mania. Robinhood — which offers equity, cryptocurrency and options trading, as well as cash management accounts — had 18 million clients as of March 2021, up from 7.2 million in 2020, an increase of 151%. The company estimates funded accounts reached 22.5 million in the second quarter.

“As Robinhood branches out into other forms of finance, including ‘buy now, pay later’ cards, I think [CEO Vlad Tenev’s] army of 22 million users will grow and become more powerful,” CNBC’s Jim Cramer said on “Mad Money” Monday night. “That’s why I’m telling you that Robinhood can be bought here,” Cramer added.

Cramer also said Robinhood could acquire another fintech company in order to expand more into the payments space, which could boost the stock even further.

Ahead of the IPO, Atlantic Equities gave Robinhood an overweight rating and $65 per share 12-month price target. Most of Wall Street is still deliberating its rating on the stock.

“We believe this superior user growth will continue given the success of the referral program and the product appeal among its target demographic,” said Atlantic Equities analyst John Heagerty. “We also see opportunity to build out the product portfolio to drive faster revenue growth.”

Robinhood has also been getting a vote of confidence from ARK Invest’s Cathie Wood since the debut.

Wood purchased about 1.85 million shares of Robinhood on Friday, adding to the 1.3 million shares she bought on Thursday. Wood’s total position is worth roughly $124.5 million, based on Robinhood’s current price.

“Nothing would be better than for [Robinhood] to be priced perfectly and stay the same price for a couple of months,” early Robinhood investor Jason Calacanis told CNBC last Thursday. “Any retail investors that might be new to the game, it would be a great lesson for them to buy and hold things for a long time. That is really where the great wins comes from.”

The Menlo Park, California-based company appears to be garnering attention from retail investors on Tuesday, after giving roughly 25% of its IPO shares to its own clients. HOOD is a “top traded stock” on Fidelity, which is generally a good proxy for individual investor interest on a given day.

HOOD – Robinhood CEO on the meme stock craze: 'I think it's a real thing'

Robinhood CEO and co-founder Vlad Tenev on Thursday defended retail clients that invest in so-called meme stocks, saying the phenomenon is real and gives embattled companies access to capital they otherwise wouldn’t have.

“I think it’s a real thing. There’s customers that love these companies, they want them to thrive,” Tenev told CNBC’s Andrew Ross Sorkin on Thursday ahead of the stock trading app’s Nasdaq debut. “You’re seeing [meme stocks] also get resources that allow them to hire really good management teams, in some cases, and then build for the future.”

Robinhood experienced record levels of new, younger traders entering the stock market during the pandemic. That surge has continued into 2021, marked by frenzied trading around meme stocks.

The millennial-favored stock trading app found itself in the middle of a firestorm in January amid the short squeeze in GameStop, which was partially fueled by Reddit-driven retail investors.

“I think what’s interesting with what we’ve seen in retail investing over the past year is that a lot of these companies have been hit hard by the pandemic,” Tenev said. “It started with some of the airlines and then followed with some of the retailers, some movie chains and brick and mortar. You have the institutions that are basically writing these companies off and then retail investors coming in and keeping them up and supporting them.”

At the height of the so-called meme stocks’ surge, Robinhood restricted trading of certain securities due to increased capital requirements from clearing houses. Robinhood raised more than $3.4 billion in a few days to shore up its balance sheet.

“I don’t know if people have understood the ramifications of what high retail participation in the markets means but I think fundamentally its a very good thing,” added Tenev.

Trouble selling shares

Robinhood — which is expected to start trading under ticker HOOD —sold shares in its IPO at $38 a piece, valuing the company at about $32 billion. Robinhood priced shares at the low end of the $38 and $42 range. The online brokerage sold 52.4 million shares, raising close to $2 billion.

It was not until roughly 9 a.m. ET that Robinood and its underwriters were finished allocating its IPO shares, an unusual circumstance for a syndicate at that point in the process. Goldman Sachs and JPMorgan Chase are the lead investment banks on the deal.

CNBC’s David Faber said an institutional source said “They’re begging us to take Robinhood shares,” Faber said on “Squawk on the Street” before the opening bell on Thursday. “And I said ‘what do they got left?’ and he said ‘lots,'” Faber added.

Robinhood — which planned to allocate 20% to 35% of its IPO shares to its retail clients — was reportedly sending messages late Wednesday to those retail investors about buying shares, according to CNBC’s Leslie Picker.

“Mad Money” host Jim Cramer said Robinhood’s IPO is a “must-work deal.”

“I think retail sentiment is on the line because these are people who want very much to make money and don’t really understand the process because the process is pretty arcane,” Cramer said.

Robinhood is a five-time CNBC Disruptor 50 company that topped this year’s list. Sign up for our weekly, original newsletter that offers a closer look at CNBC Disruptor 50 companies like Robinhood, before they go public.

GME – GameStop shares rise on e-commerce sales jump, new COO

Tiffany Hagler-Geard | Bloomberg | Getty Images

Investors are finally getting a look at GameStop‘s fundamentals following a Reddit-fueled trading frenzy earlier this year.

Here’s what the company did after the bell Tuesday.

  • It released quarterly results that missed Wall Street’s estimates.
  • In its latest executive shake-up, the company named former Amazon and Google executive Jenna Owens as its new chief operating officer.
  • And in a hint of the transformation that’s got some investors excited about the stock, the company said global e-commerce sales jumped 175% last quarter and accounted for more than a third of its sales in the period.
  • GameStop also acknowledged in a filing that it was considering selling additional equity shares.

The stock traded initially higher after the bell, but was last down about 7% with traders likely reacting to news of the potential share sale, an action many investors and analysts thought would be prudent given the Reddit-fueled run-up in the stock.

“Since January 2021, we have been evaluating whether to increase the size of the ATM (at-the-market) Program and whether to potentially sell shares of our Class A Common Stock under the increased ATM Program during the course of fiscal 2021, primarily to fund the acceleration of our future transformation initiatives and general working capital needs,” a filing from the company said. “The timing and amount of sales under the ATM Program would depend on, among other factors, our capital needs and alternative sources and costs of capital available to us, market perceptions about us, and the then current trading price of our Class A Common Stock.”

For the period ended January 2021, GameStop earned $1.34 per share on revenue of $2.12 billion. Wall Street was expecting GameStop to report earnings per share of $1.35 on revenue of $2.21 billion, according to Refinitiv’s average of the six analysts that cover GameStop.

This marks GameStop’s first quarterly adjusted profit since the fourth quarter of last year. GameStop’s fourth quarter earnings typically make up the majority of the company’s yearly earnings, boosted by holiday sales. GameStop’s same-store sales rose 6.5% last quarter.

“We are off to a strong start in 2021 as February comparable store sales increased 23%, led by continued strength in global hardware sales. As we look ahead, we are excited by the opportunities that are in front of us as we begin prioritizing long-term digital and E-Commerce initiatives while continuing to execute on our core business during this emerging console cycle,” GameStop CEO George Sherman said in the earnings release.

The company said it is continuing to suspend guidance.

Tuesday’s earnings mark GameStop’s first quarterly report since the GameStop trading mania in January.

In January, an epic short squeeze in GameStop’s stock shocked Wall Street and drew attention to an emerging class of retail investors on social media platforms like Reddit. GameStop’s share price skyrocketed to $483 per share, and subsequently lost 90% of its value. The controversy drew the attention of Wall Street and Washington.

Since GameStop’s rise and fall in January, the stock has continued to trek higher, with shares up nearly 70% this month. GameStop’s stock is up more than 860% in 2021.

GameStop has a market capitalization of nearly $14 billion, more than 10 times the $1.3 billion market value the stock had at the end of last year. A year ago, GameStop’s market capitalization was $245 million.

GameStop’s stock has traded positively on new developments for the company in the past five months like the appointment of Chewy co-founder Ryan Cohen on GameStop’s board and a focus on GameStop’s technology and e-commerce transition.

Earlier this month, GameStop announced it tapped Cohen to lead its shift to e-commerce. Cohen is serving as chairman of a special committee formed by GameStop’s board to help its transformation. Board members Alan Attal, Chewy’s former top operations executive, and Kurt Wolf, chief investment officer of Hestia Capital Management, also serve on the committee.

The committee has already appointed a chief technology officer, hired two executives to lead customer services and e-commerce fulfillment, and begun a search for a new chief financial officer with tech or e-commerce experience. GameStop previously announced that current CFO Jim Bell will resign on March 26. Citing sources familiar with the matter, Business Insider reported that Bell was pushed out by Cohen.

GameStop said Tuesday its chief customer officer Frank Hamlin will step down.

AMC – The other Reddit trades besides GameStop are also cratering with AMC, silver taking big hits

A sign hangs in front of an AMC theater on January 27, 2021 in Chicago, Illinois. Shares of AMC Entertainment more than quadrupled today as investors continue their buying spree on heavily shorted stocks.
Scott Olson | Getty Images

Besides GameStop, other popular short squeeze targets among the Reddit crowd were taking big hits on Tuesday.

Shares of AMC Entertainment, which rallied nearly 300% last week from a major short squeeze, is down 40% on Tuesday. The iShares Silver Trust ETF, part of a silver squeeze the crowd attempted, is down 6%.

Reddit trades start to unwind

Other heavily shorted names that rallied last week are also lower on Tuesday, like BlackBerry, which fell 10%. Express slipped 31%, Koss fell 41%, Naked Brand lost 27% and Nokia dropped 5% shortly after the opening bell. Genius Brands is down 3%.

Amid a retail investing frenzy in heavily shorted names last week, Reddit-obsessed traders drove GameStop, AMC Entertainment, Koss and others’ stock up in an effort to crush the hedge funds shorting the names. This week, those stocks are coming back down to earth as Robinhood and other trading apps continue to limit buying of stocks and options contracts and as the squeeze trade lost momentum and enthusiasm.

Shares of GameStop are down more than 40%, brining its week-to-date losses to nearly 60%.

Currently, Robinhood only allows clients to buy 20 shares of GameStop and 350 shares of AMC Entertainment. Clients can by 700 shares of Blackberry and 1,000 shares of Koss. However, if Robinhood clients own more than the share limit, they can’t purchase any shares.

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