Google-parent Alphabet Offloads 90% Stake in Robinhood, HOOD Shares Drop 7%

Alphabet sold 90% of its Robinhood stake after the trading app announced a profit for the first time as a public company.

Robinhood Markets Inc (NASDAQ: HOOD) shares closed Thursday trading at $11.54, down 7.23 percent from the day’s opening price. The sudden drop in HOOD shares happened after Google-parent company Alphabet Inc (NASDAQ: GOOGL) announced that it has slashed nearly 90 percent of its stake in Robinhood. Notably, Alphabet liquidated its HOOD position despite the crypto hand stock trading app announcing profit for the first time since its IPO.

Alphabet highlighted in its regulatory filing that it has around 612,214 HOOD shares as of June 30, compared with a 4.9 million stake during the first quarter that ended on March 31. Technically, Alphabets holds about $7 million worth of Robinhood shares.

Robinhood Market Outlook

Robinhood has grown to a reputable financial market application with deep liquidity in both crypto assets and stock trading. According to the company’s official website, it has about 10.8 million monthly active users with more than $89 billion in assets under custody. The trading platform has, however, experienced significant competition from other crypto trading platforms like Coinbase Global Inc. (NASDAQ: COIN), and Binance with over $250 million in registered users combined.

Earlier this week, Robinhood reported net revenue of about $486 million during the second quarter, up 10 percent from the prior quarter. Notably, the company’s transaction-based revenue decreased by approximately 7 percent during the second quarter to about $193 million. Robinhood’s cryptocurrency trading business was largely affected with its transaction-based revenue declining approximately 18 percent to about $31 million.

The company’s net deposit during the second quarter came in at about $4.1 billion, signifying more growth in the coming quarter if the monthly active users keep growing exponentially.

“Reaching GAAP profitability is a testament to the work our team has done to transform the business and better position Robinhood to drive shareholder value,” said Jason Warnick, Chief Financial Officer of Robinhood Markets. “With five consecutive quarters of revenue and Adjusted EBITDA growth, we’re continuing to drive efficiency across our operations while investing in customer experience. Looking ahead, we remain focused on delivering for customers and growing our business.”

With a crucial investor like Alphabet almost out of the picture, Robinhood is forced to widen its revenue collection avenue in a bid to remain competitive in the future. As a result, the company announced that it acquired the X1 platform, which offers a no-fee stainless steel credit card with rewards on each purchase.

Worth noting that the company’s stock has gained approximately 42 percent YTD to a market capitalization of about $11.23 billion. Perhaps Alphabet just exercised the slogan that states, buy the rumors and sell the news.

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Steve Muchoki

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