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FinanceRobinhood drops 10% to below IPO price as investors worry about bleak...

Robinhood drops 10% to below IPO price as investors worry about bleak outlook

Omar Marques | LightRocket | Getty Images

Shares of Robinhood are getting crushed in premarket buying and selling on Wednesday following a worrisome earnings report from the newly public brokerage.

Robinhood shares are plummeting 10% in prolonged buying and selling, dipping below the inventory buying and selling app’s IPO price of $38 per share.

The decline after Robinhood missed on the highest and backside traces of its third quarter outcomes. Revenue was dragged down by a slowdown in crypto buying and selling and Robinhood warned that the headwinds in buying and selling will persist into year-end.

The second quarter was “one of those idiosyncratic market events where there’s this massive interest specifically in Doge,” Robinhood CFO Jason Warnick informed CNBC. “We love it when those moments happen. It’s a great way to bring a lot of new customers onto the platform but we’re really thinking about investing in crypto over the long term. It’s gonna be impossible for us to accurately predict…revenue on a quarter-to-quarter basis.”

For the third quarter, complete internet income got here in at $365 million, lacking a Refinitiv estimate of $431.5 million. This was effectively below the second quarter’s income of $565 million, which was bolstered by a large surge in crypto buying and selling.

Third-quarter transaction based mostly income totaled $267 million, with solely $51 million coming from cryptocurrency buying and selling. Revenue from crypto buying and selling totaled $233 million within the second quarter, helped by curiosity in meme-inspired dogecoin.

Robinhood CEO Vlad Tenev stated Robinhood goes to look ahead to regulatory readability on crypto earlier than including extra digital cash to the platform. The brokerage forex presents seven cash.

Robinhood reported a internet lack of $1.32 billion, or $2.06 per share. Wall Street was anticipating a lack of $1.37 per share, in accordance to Refinitiv. 

The brokerage additionally gave a bleak outlook for the remainder of 2021. Robinhood stated it expects fourth-quarter income no larger than $325 million. The firm sees account development according to the 660,000 accounts opened within the third quarter of 2021.

“We wanted to be what we felt was appropriately conservative for our revenue guidance, particularly due to the fact that we are facing seasonal headwinds and lower year-over-year volatility,” Warnick stated on the earnings name.

On the earnings name, Robinhood administration described the quarter as one and not using a main market occasion, like GameStop buying and selling within the first quarter and the rise of Dogecoin within the second quarter.

“We’ve decided as a company to be cautious about chasing growth with marketing dollars,” stated Warnick. “You can always spend more to get more customers but what we’ve see is you tend to get lower-intent customers at worse economics.”

Robinhood can be coming into the house stretch of its lock-up interval, which can be over by December 1.

Starting Wednesday, half of tranche I convertible notes are coming unlocked as effectively as some worker shares, which totals about 62 million shares. On November 10, the opposite half of tranche I can be tradable and on December 1 all shares can be totally tradeable.

— with reporting from CNBC’s Kate Rooney.

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