Vlad Tenev and Baiju Bhatt attend Robinhood Markets IPO Listing Day on July 29, 2021 in New York City.
Cindy Ord | Getty Images
Shares of Robinhood are popping again on Friday as the volatile stock heads to end its first full week of trading up nearly 70%.
Robinhood shares rose 13% to $57.85 on Friday after its stock whipsawed this week. The newly public trading app had a meme stock moment followed by a surprising share sale announcement.
On Friday, Robinhood reiterated that it is not selling any stock, after Thursday’s news that existing shareholders will sell up to 97.9 million shares over time. That news knocked the stock down by 27% on Thursday.
“Robinhood is not itself selling any additional securities but filed the Resale S-1 on behalf of certain of its shareholders pursuant to a pre-existing contractual obligation,” Robinhood said.
Plus, the stock trading app clarified Friday morning that these sales would not start right away, easing concerns about an immediate jump in stock supply that could weigh down the shares. Robinhood said these sales can’t start until SEC approval for the transaction, which shouldn’t occur until after Robinhood’s second quarter earnings on Aug. 18.
The shares took off Friday in premarket trading after the Robinhood clarification.
The rise and fall of Robinhood marked a stark contrast to the free-commission brokerage’s lackluster debut on the Nasdaq last week.
The rise in Robinhood’s stock began on Tuesday, when it jumped more than 24%, blowing past its $38 IPO price amid major buying by hot-handed innovation investor Cathie Wood. ARK Invest owns north of 3.2 million shares of HOOD.
Wednesday brought a 50% spike in shares of the free-trading pioneer, resembling the meme stock rallies the company helped perpetuate in names like AMC and GameStop earlier in the year. The start of options trading were also credited with helping to boost the shares.
On Thursday, the stock tanked following news of the share sale. The stockholders were among those who helped shore up Robinhood’s balance sheet during the historic trading mania earlier this year.
Faced with unprecedented volatility and increased deposit requirements, the broker was forced to tap credit lines and raised new debt to ensure it had enough cash to clear trades. The selling shareholders include a number of venture capital firms that invested in Robinhood early on.
The investors’ downside protected notes got converted at a 30% discount to the IPO price of $38, so they bough the equities at $26.60 per share, according to Rainmaker Securities. Now, the investors will be able to sell those shares after SEC approval.
“Emergency financings tend to provide short term outs, and lots of protections for the investors. That’s what you get when you need $3 billion in 48 hours,” Greg Martin of Rainmaker Securities said.