Robinhood went public on Thursday, July 29th. The company is currently facing massive scrutiny over the Citadel-Robinhood market manipulation. Retail investors were prohibited from purchasing GameStop and AMC stock early this year as the affiliate hedge fund partner, Citadel, lost billions during the beginning of the momentum rally.
Retail investors continue to hold and buy the stock in efforts to squeeze shorts out of their long-short positions. The novice investor is no longer looking to invest with Robinhood’s trading app but rather moving towards a more secure and traditional way to invest.
Brokers such as Vanguard and Fidelity are becoming more popular as they provide new retail investors with peace of mind when it comes to buying the stock they want. Now, Robinhood has an entire community of momentum traders betting against the company as a whole. And while not everyone in the community is upset with Robinhood, the negative sentiment within the community weighs heavy.
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Robinhood’s stock ticker symbol, HOOD, started trading at $38 before falling to around $34 per share. The company currently has a market cap of $31 billion dollars. Robinhood’s expected valuation sits at approximately $35 billion dollars. David Trainer, Chief Executive of New Constructs believes the company is overvalued is worth more around $9 billion dollars.
“We think the stock is worth no more than $9 billion and that Robinhood will likely not be able to continue the robust growth it saw in 2020 due to looming regulatory risk, increasing competition and an undifferentiated service.” – David Trainer
As a retail investor who has seen the manipulation behind AMC and GameStop stock, I believe Robinhood is going to have an upper hand during its initial growth before finally tumbling.
“What’s weird about today,” said Carnegie Mellon University associate professor of finance Bryan Routledge, “is there was no news other than the shares started trading. That is puzzling.”
So, there’s already some concern as to why HOOD stock is gaining traction at the moment.
Robinhood IPO – Worst Debut in History
According to experts, Robinhood has had the worst IPO in history dethroning the 2007 IPO of MF Global Holdings Ltd which ended its first day down 8.2%. Robinhood’s was 8.4%.
Luckily for Robinhood, Cathie Wood, CEO of Ark Invest purchased $65 million dollars worth of HOOD stock. This volume pump might be the reason why HOOD stock is trending upwards at the moment.
Ark has not responded to request for comments. Other investors are staying on the sidelines due to valuation concerns and the negative sentiment from retail investors.
What’s preventing investors from buying HOOD stock is the lack of leadership in the company. Vlad Tenev, Robinhood’s CEO, has failed to take responsibility for buying restrictions early this year. What angered retail investors was more so that the platform prevented them from buying only momentum stocks (meme stocks).
The community has felt an insane amount of market manipulation all year with no help from regulators regarding the naked shorting and overleveraged positions and dark pool trading.
Will Robinhood Stock Go Up?
Robinhood would need to continue growing for its stock price to go up. Investors would need to deem HOOD stock not risky and believe in the company’s vision.
However, Vlad Tenev is under high scrutiny at the moment. The link that’s missing or broken, is trust.
Vlad Tenev Dumps Robinhood Stock on IPO Day
On IPO day, Vlad Tenev dumped approximately 7.2 million shares according to this SEC From 4. The dump netted Vlad around $275 million dollars. According to Reuters, Robinhood warned that investors who sell or “flip” their IPO shares could be restricted from participating in future IPO deals.
“We won’t prevent you from selling shares you get through the IPO Access program,” the company said on its website.
“However, if you sell IPO shares within 30 days of the IPO, it’s considered “flipping” and you’ll be restricted from participating in IPOs for 60 days.”
Vlad Tenev, CEO of Robinhood flipped his own IPO shares the same day the company went public.
Should You Buy Robinhood Stock?
I personally couldn’t invest in a company leader that was a culprit to freezing momentum trading to prevent a hedge fund from losing more money than they’d like to. The hypocrisy behind Robinhood’s IPO flip also doesn’t align with my values. And for those reasons I’m out.
Can Robinhood be trusted?
In my personal opinion, no. Robinhood is an affiliate partner to one of the biggest hedge funds shorting both AMC and GameStop stock. These short sellers have driven the stock prices down through manipulation tactics such as naked shorting and dark pool trading.
As AMC and GameStop share prices began to surge, Robinhood restricted retail investors from buying the stocks. When questioned, Vlad denied protecting its hedge fund affiliates. Retail investors and large influencers such as Elon Musk were quick to see past the CEO’s story.
From what I’ve seen, Robinhood has an amazing platform layout which makes the shame that much bigger. Vlad could gain the trust back from retail investors by uncovering the manipulation that went on with it’s clearing house, Citadel Securities.
Citadel Securities is now facing federal investigations.
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Read: Why new retail investors should avoid investing with Robinhood
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