Pre-market actions: Robinhood completes the loop of the memes action phenomenon
According to data from researchers at VandaTrack, Robinhood was the third most purchased title on retail platforms on Wednesday, getting $ 50.5 million in net purchases.
A bit of background: VandaTrack notes that Robinhood’s earnings are still overshadowed by original memes stocks, GameStop, and AMC Entertainment. At its peak, retail investors bought $ 352 million in shares of the ailing video game retailer and $ 600 million in the movie chain.
Yet Robinhood benefited from many factors. Trading in options for the stock began on Wednesday and prominent fund manager Cathie Wood has revealed large buys in recent days. Robinhood has also actively courted ordinary investors who might be interested in purchasing shares.
There may still be “room for the movement to continue,” said VandaTrack analyst Ben Onatibia. He noted that the jump is unusual, however, which makes the trajectory difficult to predict.
“After a bad listing, retail demand increases, which is extremely rare with IPOs,” he said.
The stock fell in pre-market trading on Thursday after Robinhood said in a filing that investors, including venture capital firm Andreessen Horowitz, were selling nearly 98 million shares.
On the radar: Meme stock or whatever, Robinhood could possibly run into problems just based on its business model.
Robinhood achieved 81% of its sales in the first quarter through what is known as “order flow payment”, which is increasingly under regulatory scrutiny.
Break Down: The reason Robinhood doesn’t need to charge a commission is because it’s making money in another part of the trading process. When an investor places an order to buy shares on their app, Robinhood routes the order to a market maker like Citadel Securities, who then takes care of the execution and pays Robinhood for that privilege.
Consideration of this process has increased since the GameStop Frenzy. While the company argues that this is a crucial part of its efforts to democratize commerce, Securities and Exchange Commission Chairman Gary Gensler said in June that payment of order flows is raising. questions as to whether investors are getting best execution, “and noted that directing huge swathes of transactions to a few select market makers could” increase potential system-wide risks. “
If regulators take action, Robinhood’s business could be at risk.
“An outright ban on order flow would have an immediate and serious impact on Robinhood’s revenue,” research firm New Constructs said last month. “We don’t believe Robinhood can continue to offer commission-free transactions, which would put the company at a disadvantage compared to rivals Fidelity and Charles Schwab.”
Uber’s great driver shortage is costly
Passengers flock to Uber as vaccines give people new confidence to leave their homes and get around. But the company had to spend a ton of money to have enough drivers on its platform, which took a toll on its bottom line.
A big problem for the rideshare company was how much it had to spend on incentives for its drivers.
“The market was not in a place that we considered healthy and we wanted to lean to reduce wait times, to lower push levels,” CEO Dara Khosrowshahi said on a call with analysts.
Khosrowshahi said the company is making good progress, growing to nearly 420,000 monthly active drivers and couriers in the United States from February to July, and has started to reap the short-term benefits.
But he acknowledged that in cities like New York, San Francisco and Los Angeles, “demand continues to exceed supply and prices and wait times remain above our comfort levels.” Shares are down 4% in pre-market trading.
Nintendo’s pandemic news streak is cut short
The Japanese company said Thursday sales fell nearly 10% in the quarter ending June, a sign that fewer people stayed at home playing video games as some countries around the world began to reopen. , reports my CNN Business colleague Michelle Toh.
Operating profit fell more than 17% to 119,752 billion yen (about $ 1 billion) from the same period a year ago, as sales of its Switch consoles plummeted.
Disconnection: In the quarter, 4.5 million units of Switch hardware were sold, down about 22% from 5.7 million the previous year.
The company blamed “factors such as logistical delays caused by Covid-19 and the impact of the semiconductor shortage on production.”
But times are changing too. “Animal Crossing: New Horizons” – the Switch title that caused a sensation during the pandemic – sold just 1.3 million copies in the last quarter, compared to 10 million in 2020.
Investor Perspective: The company has consistently shown one blowout quarter after another during the pandemic. But he has also been dogged by concerns about how long he can maintain his streak of success. These concerns may be coming true.
Also today :
- The Bank of England makes its latest policy announcement.
- Initial jobless claims in the United States for last week at 8:30 a.m. ET.
Coming tomorrow: The US jobs report for July comes after private payroll gains were much weaker than expected.