The cost to purchase one Robinhood share (HOOD) dropped massively in the pre-market session on Aug. 5, beating even the so-called volatile cryptocurrencies like Bitcoin in terms of intraday losses.
In detail, HOOD was down 10.2% to $63.25 as of 0800 EDT compared to $85-high in the previous session. On the other hand, Bitcoin (BTC) is down almost 6% over the past 24 hours, trading around $37,600.
The stock plunged partly because of its excessive valuations that prompted traders to lock their interim profits. Moreover, its sell-off accelerated after Robinhood Markets announced that it would sell up to 97,876,033 of its Class A shares over time.
Robinhood $HOOD to sell 97,9 million shares from early investors (the same bloated billionaire VC funds that get in at dirt cheap prices). I said on my show be careful not to be long when lockup ends and firms begin ratings.
Be nimble if you are a trader.
— Charles V Payne (@cvpayne) August 5, 2021
Nevertheless, the company clarified that it would not receive any of the proceeding capital. Instead, the selling shareholders—including Andreessen affiliates and New Enterprise Associates—would receive the benefits.
HOOD’s decline came a day after it soared higher by more than 50% in a meme rally, earning Robinhood’s zero-fee trading platform a market capitalization of $58.9 billion. The supersonic volatility caused multiple trading halts on the Nasdaq exchange.
Supportive retail traders, led by Cathie Wood’s flagship ARK Innovation exchange-traded fund, started buying HOOD after its disappointing initial public offering on July 29.
That marked another example of how an army of small traders enjoyed influence over Wall Street, a trend Robinhood itself helped boost during the infamous GameStop and AMC stock pump in January 2021.
The frenzy eventually led to the shut down of Square Capital, a hedge fund that had placed a short bet on GameStop. Additionally, Melvin Capital, which was also bearish of GameStop, suffered a 53% loss.
Retail-led upside booms also spilled over the cryptocurrency market, with meme crypto Dogecoin’s YTD returns shooting upward of 8,000% following the congregations of traders on Reddit and other social media platforms, who wanted to push the Dogecoin prices to $1. To date, DOGE price managed to reach nearly $0.70.
But the so-called “meme stocks” dropped hard following their super-volatile bull runs. For instance, GameStop’s was down by 70% on Wednesday from its record high of $483. Similarly, Dogecoin dropped 75% and AMC Entertainment, 64.23%.
London-based hedge fund Odey Asset Management, which manages about $4.1 billion, recently took a short bet on the AMC stock.