Robinhood (HOOD.US) enjoyed some elevated volatility in recent days, thanks to two contradicting media reports. First, it was reported that a trading platform may be acquired, leading to a stock price jump. However, the report was later rejected by interested parties, leading to a pullback. Let's take a closer look at Robinhood and recent newsflow surrounding the company.
80% share price drop since IPO
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Create account Try a demo Download mobile app Download mobile appRobinhood's debut in July 2021 was one of the hottest IPOs of the year. While the stock experienced a massive rally in the first days of trading, share price started to slide. Poor outlook, overhyped initial valuation and reputational damage has pushed company stock 80% below its IPO price and more than 90% below highs off the highs from early-August 2021. Company has seen some user exodus recently what further put under question whether it can turn profit anytime soon. However, depressed valuation makes Robinhood a target for acquisition.
Hopes for takeover by FTX crypto exchange
Speculations that someone may acquire Robinhood due to its cheap valuation have been ongoing for some time. One of companies named as potential acquirers was FTX, a global crypto exchange. Sam Bankman-Fried, CEO of FRX, took a 7.6% stake in Robinhood in May, fuelling speculations. A Bloomberg report released on Monday claimed that FTX is seriously interested in acquiring Robinhood but no offer has been made yet. This report sent Robinhood shares over 12% higher on Monday with stock briefly trading at 3-week high.
FTX CEO says no talks at the moment
However, hopes for a deal waned after FTX CEO Bankman-Fried said that there are no active M&A discussions ongoing with Robinhood at the moment. He said that Robinhood has interesting prospects and its worthy to explore ways in which his firm may partner with it but there is no intention to acquire it. This has triggered a pullback on Robinhood share but the stock has not erased all of this week's gains yet.
What's next? Robinhood had a good business model that provided a cheap trading platform for retail investors. However, since its beginnings a lot of other companies also started to offer low- or zero-fee trading. While Robinhood still has an abundant client base, it struggles to leverage it like other older and more established brokers. If a company continues to lose clients, there may be no quick end to the current downtrend.
Quick look at market
Shares of Robinhood (HOOD.US) are trading in a strong downward move since all-time highs were reached back in August 2021. Taking a look at the stock at H1 interval, we can see that even after an early-week jump triggered by FTX takeover rumors, share price still did not manage to break above the upper limit of local market geometry at $9.95 per share. News-triggered gains were short-lived and stock has quickly pulled back below price zone marked with 23.6% retracement of a recent upward impulse. Stock is set to open more or less flat today and in case pullback continues, the first support level to watch can be found in the $7.90 area. Note that unless a break above the aforementioned $9.95 level occurs, technical outlook for the stock remains bearish.
Source: xStation5
