Robinhood (HOOD) - Get Robinhood Report shares extended gains Wednesday, rising for the fourth consecutive session, as the online trading platform rebounds from last week's disappointing Nasdaq debut to trade as high as $85 a share and add more than $20 billion to its market value.
Robinhood was one of the market's most-active stocks Tuesday, with 3.6 billion in shares changing hands amid a 24.2% surge that lifted shares in the group firmly past their IPO price thanks in part to a wave of retail investor interest.
"This is Reddit," TheStreet's founder, Jim Cramer, said on CNBC's Squawk on the Street program.
This week's rally marks a stark contrast to last week's debut on the Nasdaq, when shares fell 8.4% on the session to close at just under $35 each after the group priced it's $2.1 billion IPO at $38 a share just hours it revealed it's facing a joint FINRA/Securities and Exchange Commission investigation into whether its employees traded shares in fast-moving meme stocks such as GameStop (GME) - Get GameStop Corp. Class A Report prior to imposing controversial restrictions on customers in late January.
Data from the Yolosocks.live website, however, which tracks real-time mentions on stocks within Reddit's r/wallstreetbets chatroom, indicates that GameStop, AMC Entertainment (AMC) - Get AMC Entertainment Holdings, Inc. Class A Report and Advanced Micro Devices (AMD) - Get Advanced Micro Devices, Inc. Report are till the most-discussed stocks among users over the past 24 hours.
"This stock is not without risks and I think they almost went bust when they had a two-day (trade settlement) squeeze in the WSB initial craze. But they corrected that to shrink their settlement time frame," said Elazar Advisors analyst Chaim Siegel, who lifted his rating on the stock to 'buy' with a price target of $151 per share.
"Payment for order flow is another risk but so far is an allowable practice. Robinhood has been fined but at manageable levels. Regulations are something that needs watching of course," he added. "I also like that today it went topside of its initial public offering price which is important technically early on."
Robinhood shares were marked 47.4% higher in early afternoon trading Wednesday to change hands at $69.40 each, a move that would give the group a market value of around $57 billion. The stock hit a session high of $85 each before being briefly suspended by the Nasdaq.
Robinhood said it generated $959 million in revenues last year, a 245% increase from 2019, and noted it has 17.7 million active users on the platform with aggregate assets of around $81 billion.
However, more than three quarters of that revenue total came from larger brokerage firms in the form of so-called payment for order flows (PFOFs), a controversial practice that has caught the attention of the SEC.
"Robinhood explicitly offered to accept less price improvement for its customers in exchange for receiving higher payment for order flow for itself," SEC Chairman Gary Gensler said last month in a speech during which he addressed by 'conflict of interest concerns' and the 'gamification' of stock trading on retail brokerage platforms.
Robinhood itself noted that new regulations on PFOFs could trigger "significant changes to our business model", while also detailing a series of regulatory and legal challenges linked to everything from anti-money laundering and cybersecurity to allegations of unethical conduct and lapses in transparency.