Robinhood Insiders Speed Up Stock Sales Days After New Risk Disclosures Relating To Crypto And Payment For Order Flow

Robinhood fell about 2% after hours on Friday after the company announced it was planning to speed up a previously announced stock sale.

Andreessen Horowitz, 9Yards Capital and New Enterprise Associates are among the selling shareholders, who may get an opportunity to offload their shares as early as Wednesday, according to Bloomberg, citing a company filing.

Robinhood fell 28% when the potential sales were first announced back at the beginning of August. 

Bloomberg explained: “The company filed a second amendment to a Sept. 1 filing, for the potential resale of shares by holders and an acceleration request asking the SEC to declare the filing effective at 4:30 p.m. ET on Oct. 13.”

At the same time, Robinhood also disclosed in a new filing Thursday night that “regulatory intervention in cryptocurrency trading” and “a payment arrangement between brokerages and trading firms” were additional risks the company faced to its business. 

The company made the statements in an amended filing related to the stock sale, Bloomberg reported.

“The regulatory landscape involving cryptocurrencies is constantly evolving and is subject to change,” the company wrote. 

It also made note of the fact that crypto trading accounted for 41% of its revenue in the second quarter. 

Robinhood had also previously warned about its Q3 guidance, something Zero Hedge contributor Quoth the Raven recently wrote about while highlighting risks in owning the name. 

“Robinhood’s valuation is simply a bubble, in my opinion, which makes it the short end of this trade,” he wrote. “The company moved as high as $52 per share at one point, all on an orchestrated gamma squeeze by the folks over at Wallstreetbets. This took an already overvalued name at the time of its IPO and stretched its valuation into stratospheric territory.”

He continued: “But think back: Robinhood had trouble finding a bid at its $37/share valuation when it went public and, since then, has done nothing but reported Q2 earnings that included a warning about a slowdown in trading activity, either setting the stage for a rougher Q3 or sandbagging.”

The article also noted the concentration on crypto asset risk, stating: “The company’s revenue stream is becoming increasingly dependent on its crypto trading business at a time when U.S. regulators have admitted they won’t ban bitcoin, but still have a long way to go in setting rules for the new asset class.”

Finally, it pointed out the payment for order flow model as potentially being at risk, per SEC Chairman Gary Gensler, who said banning the practice was “on the table” in late August.

On top of that, at the end of September, we wrote a comprehensive article asking whether or not the President of Robinhood dumped all of his AMC stock right before the brokerage suspended trading in the name.

“I sold my AMC today. FYI  –  tomorrow morning we are moving GME to 100% – so you are aware,” Robinhood’s President and COO, Jim Swartwout allegedly said in an internal chat. 

Perhaps Robinhood’s existing investors that are looking to hit the exits early have become far too aware of all of these risks…

Tyler Durden
Sun, 10/10/2021 – 12:00

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