RobinHood Stock Surges 40% above IPO price in after-hours trading

Robinhood Stock price jumped 11.65% to $52.25 after the market closed last night. So is it all good in the HOOD for investors, or will this be short-lived?

Shares in retail trading stock trading app Robinhood Markets Inc (NASDAQ: HOOD) have been almost as volatile as the meme-stocks that made it famous.

Considering the stock was mauled following its debut NASDAQ listing last week, the recent rally is even more impressive.

The Robinhood stock price came under pressure from the offset. After opening at $38.00 on Thursday, the stock was soon changing hands at $33.35.

However, since then, each day has been as green as the company’s logo.

By last nights close, Robinhood had rallied 40% to $46.70. However, it was after the bell that the fireworks started. In extended trading, the stock price surged to $52.25, eclipsing the listing price by 37%.

Opinions on HOOD’s prospects were divided ahead of last week’s IPO. Its business had been booming during the lockdown as brokers increased users at an alarming rate. Furthermore, its zero-cost trading and game-like functionality had made the app a favourite of the retail crowd.

However, more recently, the focus has been on exactly what zero-cost means.

Reputational damage

Robinhood can offer commission-free trading by routing client orders through Citadel Securities, Virtu Americas, and Wolverine securities. The algorithmic market-makers then pay Robinhood for the order flow. This has drawn scrutiny from disgruntled users and the Securities and Exchange Commission.

As a result, Robinhood was forced to pay a $65 million settlement with the SEC in December after the regulator ruled the apps’ execution policy was detrimental to the best interests of its client base.

This year, Robinhood’s reputation was brought into question when it became a key player in the Reddit-fueled GameStop short-squeeze. During the height of the GME sage in January, Robinhood placed buying restrictions on a handful of high-flying meme-stocks, including GameStop. This again raised questions over its relationship with Citadel securities.

The hedge fund Melvin Capital suffered multi-billion dollar losses on its short GameStop position. Losses which could have been considerably worse were it not for the intervention of Robinhood.

Eyebrows were raised when it was revealed Robinhood’s largest revenue stream, Citadel Securities, held a $2 billion investment in Melvin Capital.

As a result, Robinhood CEO Vladimir Tenev and Citadel founder Ken Griffin were hauled in front of a virtual Congressional House Financial Services Committee hearing. The grilling that followed led Democrat lawmakers to call on regulators to ban the practice of payment for order flow.

Furthermore, the GameStop drama shows no signs of going away. Questions remain regarding the part Citadel played, which could have implications for Robinhood.

So far, the Robinhood stock price has shrugged off these concerns. And the news that Cathie Wood has accumulated a large position has only increased its popularity.

HOOD price forecast

Until the stock trades for a couple of months, It’s impossible to give a Robinhood stock price prediction.

Although it’s clear, Robinhood will continue to make headlines. Whether those are good for the stock price or not remains to be seen.

The best policy for traders is to sit back and let the price action play out for a while. The stock may prove to be a great investment, or it may not be. But for now, it’s too early to tell.

Robinhood stock price chart (Daily)

Robinhood stock price