Aattempts to appease angry users did not help the Robinhood [HOOD] share price, which continues to fall. Appalled by its decision last year to restrict Gamestop stock trading, investors filed a lawsuit against the commission-free trading firm.
Last Tuesday, the company published a blog post outlining the steps it has taken to avoid imposing trade restrictions.
Robinhood became a household name before its mega IPO, when retail investors used the trading app to drive Gamestop’s stock price and other stocks to dizzying heights.
The rally in meme stocks has caused online brokers to impose trading restrictions on certain stocks in 2021. This has led to problems for several governments, as well as private lawsuits from angry customers and investors, who have caught the attention of the SEC.
In a blog post titled “January 28: One Year Later,” Robinhood, led by CEO and co-founder Vlad Tenev (pictured above), shared the measures it has implemented to ensure customers never be “surprised by trade restrictions” again.
Robinhood stock price is down
Shares of Robinhood have plunged 21.5% year-to-date, closing at $14.02 on Feb. 2, in stark contrast to its all-time high of $85 in August.
When the company hit the market in July 2021, Robinhood’s IPO price was $38, reaching a mega valuation of $31.8 billion. Since its stock market debut, the stock has fallen 59.7%.
“Robinhood was one of the darlings of the pandemic. Almost exactly a year ago, he was at the center of the stock mania meme. And it’s clearly cooled off as we head into a new year,” said Art Hogan, chief market strategist at National Securities in New York.
“Robinhood was one of the darlings of the pandemic. Almost exactly a year ago, he was at the center of the stock mania meme. And it has clearly cooled off as we head into a new year” – Art Hogan, National Securities Chief Marketing Strategist
The company believes it is in a “position of strength”
The commission-free trading company said on its blog that it was in a “strong position” to support its clients during unlikely market events.
Robinhood said its net capital position was $28 billion, about 21 times the requirement stipulated by the SEC, putting the company in the ranks of the largest brokerage firms in the United States.
In the blog, Robinhood said it was recruiting to strengthen its risk and compliance infrastructure, as well as evolve its technology offering to insulate the company when managing market volatility. It increased the size of its customer support team and introduced “24/7 support for all issues” so it “can be there for our customers when they need us”.
What’s next for HOOD stock price?
Due to last year’s meme-swapping saga, the SEC has been closely scrutinizing commission-free brokerage trading practices, particularly payment for order flow (PFOF).
Robinhood derives much of its revenue from PFOF and other transaction discounts. Any new regulations in this area could impact the business model of the company.
The threat of an SEC crackdown is an “overhang” for the stock, said Greg Martin, co-founder and managing director of Rainmaker Securities. “The market is not very patient with them,” he added.
Diminishing investor interest in retail has hit Robinhood’s share price and regulatory scrutiny of the company’s main source of revenue has not helped.
“They have a global brand, which they did without any marketing. Now they need to create more sustainable and sustainable revenue streams,” added Martin.
“They have a global brand, which they did without any marketing. Now they need to create more sustainable and sustainable revenue streams” – Greg Martin, co-founder of Rainmaker Securities
Many analysts agree that the company needs to expand its offering to survive. Robinhood has grown to allow customers to invest in cryptocurrencies and purchase IPOs. He also tested a wealth management tool and discussed the retirement account offering.
According to Marketscreener, the consensus rating on Robinhood’s stock is “outperform.” The average HOOD stock price target is $21.77, a significant upside from the current level.
Jeff Tomasulo, managing director of Vespula Capital Management, believes that it will remain to be seen whether the market will be patient. He said that “there aren’t many brokers like Robinhood”, so as it “gets cheaper and cheaper” the company will become a “really good takeover target”.
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