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Here's Why Robinhood Stock Plunged Today

By Joe Tenebruso – Aug 5, 2021 at 12:43PM

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Major stockholders are selling a large portion of their holdings.

What happened 

Shares of Robinhood (HOOD -2.21%) sank on Thursday after the popular stock-trading platform said a group of its early investors filed to sell more than 97 million shares. At 12:15 p.m. EDT, Robinhood's stock price was down 13%. 

So what

Robinhood conducted its initial public offering (IPO) last week. After initially falling below its $38 IPO price, Robinhood's shares quickly rebounded. News that fund manager Cathie Wood had purchased shares for her closely followed ARK Invest funds helped to spark the rally. Traders on social media platforms like Reddit piled on, which helped to accelerate the gains. 

A keyboard button labeled sell.

Image source: Getty Images.

Yet after its stock price more than doubled earlier this week, some of Robinhood's pre-IPO investors are now seeking to cash in on their gains. A number of venture capital firms, including Andreessen Horowitz and New Enterprise Associates, filed to sell up to 97,876,033 shares. These stockholders can now sell their shares at a time and price of their choosing.

Now what

The news that several of Robinhood's largest investors are choosing to take profits so soon after its IPO is a bit concerning. Although it's not atypical for venture capital firms to wring the register once a company they invested in begins trading on the public markets, their selling suggests that these professional investors do not believe the recent rally in Robinhood's stock price is sustainable. Other shareholders apparently agree, and many are likewise deciding to sell their shares today.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Robinhood Markets Stock Quote
Robinhood Markets
$9.31 (-2.21%) $0.21

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