Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) sold its remaining stake in Robinhood Markets (NASDAQ:HOOD), the online brokerage.
The search giant had sold nearly 85% of its stake, obtained before Robinhood’s initial public offering (IPO), by the end of March.
Robinhood came public in July 2021 at $38/share. HOOD stock opened this morning at $8.17, a market capitalization of about $7.11 billion. Shares are about even on the year but down over 20% in the last full year.
Leaving the Hood
Robinhood lost $85 million, 9 cents per share, on revenue of $467 million during the September quarter. This followed a small profit of $25 million, 3 cents per share, on revenue of $486 million during the June quarter.
In the September release, co-founder and CEO Vlad Tenev said the company was growing its market share in retail trading. He credited Robinhood Gold, a subscription service that pays 4.9% interest on invested cash. The stock fell almost 20% after the September numbers came out.
I wrote just before earnings that Robinhood needs to “grow up,” focusing on long-term investing instead of short-term trading volume. But following that advice would not have made much difference. Shares in market leader Charles Schwab (NASDAQ:SCHW) are down 34% in 2023.
Robinhood came to fame in the last decade as the home for small day traders. It pioneered free trading and collected money from larger firms for executing its order flow and accessing its data. It raised $2 billion privately and had a market cap of $11 billion in 2020.
Bulls suggested in August that investors buy the stock when it fell below $10. This came after Cathie Woods’ ARK Funds bought shares. Its ARK Innovation (NYSEARCA:ARKK) fund currently holds over 21 million Robinhood shares.
HOOD Stock: What Happens Next?
Expect some short-term pressure on HOOD stock as the Google news is digested. Big gains can’t be expected until investments by small traders pick up again.
As of this writing, Dana Blankenhorn had a LONG position in GOOGL and SCHW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
