Robinhood Markets: (NASDAQ: HOOD), whose online broker has helped democratize investment by fueling the rage of the meme stock market, which continues today, has recently caused a stir in the public. His debut was initially hailed by the collective “meh”.

Since then, stocks have slipped slightly, rising 50% one day and 25% the next. At Thursday’s close, Robinhood is up about 25% from its IPO price, which raises the question of whether stock traders will take the stock as fully as they did for the stock. AMC Entertainment Holdings and GameStop: 1000% or more

Of course, there is potential for Robinhood to acquire meme stock status, but as far as online brokers are concerned, those same traders may eventually avoid it.

Day traders look at their screens.

Image source: Getty Images.

Robinhood meme stock potential

An online broker is growing rapidly. The number of monthly active users increased from 11.7 million at the end of last year to 22.5 million today. Robinhood itself says its growth has come as its business has gone viral, allowing 80% of its new accounts to be joined by an organic or referral program that rewards investors with shares on someone else’s platform. to send:

More than half of its new clients are first-time investors. This is partly due to the fact that Robinhood technology makes investments accessible to the general public. By eliminating the fees for buying and selling stocks, it made it easy for investors to enter the stock market with very little money.

Indeed, the average Robinhood investor is 31 years old, with an account balance of about $ 4,500, according to the company. For comparison, the average account size for the largest discount broker Charles Schwab, more than $ 100,000.

The online broker was trying to reward retailers for supporting its program by reserving 20% ​​to 35% of its IPO shares to users of its platform. Retail investors typically receive less than 10% of their IPO. As C AMC Entertainment CEO Adam Aron provided free concessions on the concession stand to engage with retail investors who increased the theater operator’s stake, Robinhood sought to put those who used its program on the shelves. The Wall Street Journal: reports that it has completed the sale of shares to 300,000 of its users or about 1.3% of the total accounts.

A person using a mobile stock trading program.

Image source: Getty Images.

Controversial factors against it

However, skepticism about Robinhood remains, with many traders still believing that brokers operate on a hedge basis.

When the trading frenzy began earlier this year և hedge funds were accumulating massive losses as GameStop shares rose, Robinhood blocked the stock trading brakes (and a few others). First, traders could not buy any of its stock, only sell it, and then the purchase was limited to a handful of shares.

Restrictions blew winds off GameStop rallies, and while a number of short traders were still suffering heavy losses, they were finally able to defuse their position, something that probably would not have happened if Robinhood had not restricted trading in stock.

However, Rob Tenhood CEO Vlad Ten said the deduction was made to meet the capital requirements of the Securities and Exchange Commission. Because a separate division of Robinhood Securities is required to make deposits in clearing rooms to cover trading, virtually all of the trading on the platform took place in just a few shares, Robinhood had to limit its purchases until it had enough capital. to collect .

However, the episode left a bad impression on many traders.

It has a connection:

Regardless of the Robinhood platform remains popular, ապ its future looks bright. If it can keep most of its customers until they retire (or turn them into other types of accounts, such as credit cards or micro-payments, as it puts it), the value can greatly expand over time.

Robinhood also acquired Say Technologies, which connects shareholders with investing companies. In fact, only one Wall Street analyst was asked to ask a question.

With its shares now trading above IPO prices, there is certainly support for Robinhood Markets shares, but the online brokerage agency that allowed retailers to create so-called meme shares does not seem to have the same qualities at first glance. , around which traders can rally.

The path to democratizing finance seems to be going well, but Robinhood is unlikely to become a meme fund.

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