Robinhood broker shares slide 12% as frenzy fades among US small traders

Investor frenzy vastly boosted the stock market value of tiny companies such as retailer Gamestop.         

Shares of Robinhood Markets fell 12% as the US fee-free broker's warning about a slowdown in trading raised concerns about its reliance on a pack of small-time investors to sustain a frenzy in stocks, options and cryptocurrencies. That frenzy vastly boosted the stock market value of tiny companies such as retailer Gamestop.             

In its first results as a public company, Robinhood said the crypto trading mania this year helped double its second-quarter revenue, but also warned it expected retail investors who trade on its popular app to take a breather in the third quarter.

"Robinhood is dependent on high volatility and you don't get high levels of volatility all the time," said David Madden, market analyst at Equiti Capital. 

"It comes in spurts and it can just be a ghost town for months and months."

Cryptocurrency

Dogecoin, a meme-inspired cryptocurrency that made up 62% of Robinhood's total crypto volumes in the second quarter, has catapulted about 9,000% in value in the past year.

Bitcoin, the world's biggest cryptocurrency, is up 52% in 2021, but Refinitiv data shows trading volumes have declined in every month since May.

Robinhood's own stock has been dubbed the "meme of memes" after it rallied like meme stocks GameStop and AMC Entertainment.

Social media chatrooms were abuzz with activity as users reacted to the company's warning.

Message volume related to Robinhood spiked by nearly 36% on Stocktwits, with positive and negative sentiment toward the stock split evenly.

Robinhood also said it was considering selling branded merchandise, in a move similar to AMC, which has floated the possibility of selling products from theatres. 

• Reuters