Robinhood was tipped to open lower again as the value of the retail investor trading app continues to slide.
Analysts pointed out yesterday that the value of the trading app is now below the cash on its balance sheet, which at the end of May stood at US$6.2bn.
A steady drift away from the market by retail investors has affected trading volumes with active users down by 39% from last year with that trend likely to have accelerated with the slide in cryptocurrencies, said analysts.
“Plummeting crypto valuations will have a direct impact on both volumes and order value,” one told Bloomberg.
Robinhood’s value has also been knocked by SEC changing the rules related to ‘payment for order flow’ (PFOF).
PFOF is where retail brokers, including Robinhood, Charles Schwab Corp and TD Ameritrade, sell their customers’ orders for a profit to giant Wall Street market makers such as Citadel Securities and Virtu Financial.
In the first quarter of 2022, Robinhood made around three-quarters of its turnover from PFOF, but the rules will see these trades go up for auction instead to help transparency and investors get a better price.
Consensus share price targets for Robinhood are now hovering between US$5-7 a share compared to an IPO price of US$38 in August 2021 and subsequent highs of more than US$70.
Robinhood co-founders chief executive Vlad Tenev and chief creative officer Baiju Bhatt have been sharing in the pain of their investors. Neither now appear on the Bloomberg billionaire list having been firm fixtures only a few months ago.
Shares closed yesterday at US$7.05.