Please ensure Javascript is enabled for purposes of website accessibility

Why Robinhood Stock Surged Back Today

By Rich Smith – Aug 6, 2021 at 11:22AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Don't expect a huge new wave of Robinhood shares to hit the market -- until Aug. 18 at the earliest.

What happened

Shares of stock-trading platform operator Robinhood Markets (HOOD -2.21%), which plunged Thursday on reports of an impending 98 million-share sale by early investors, bounced partway back in early trading Friday, and were up by more than 10% as of 11:15 a.m. EDT.

Credit for that rebound should go to quick action by Robinhood's investor relations team.

Woman aiming a bow and arrow

Image source: Getty Images.

So what

Traders had a bit of a freakout Thursday after it was reported that venture capital firms such as Andreessen Horowitz, which held stakes in Robinhood prior to its July 29 initial public offering, were lining up to dump some 97.9 million shares of the company on the market.

Early Friday morning, however, Robinhood rushed out a press release to reassure investors that "Robinhood is not itself selling any additional securities" that would dilute its shareholders, and that its filing of the Resale S-1 on Thursday merely fulfilled "a pre-existing contractual obligation" that it owed to "certain of its shareholders."  

Now what

Furthermore, explained Robinhood, the 97.9 million shares covered by the Resale S-1 cannot, in fact, be sold until the SEC has declared the S-1 effective -- and the company doesn't think that will happen until it has filed its 10-Q quarterly earnings release on Aug. 18.

Long story short, the company's earlier investors may still be planning to sell a lot of Robinhood stock -- but those sales won't begin for another couple of weeks at least. Until then, there's still time for meme stock traders to have their fun with it, and that seems to be what's happening Friday.

Rich Smith 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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.