Alphabet, the parent company of Google, recently announced that it has reduced its stake in Robinhood Markets by nearly 90%. This comes after Robinhood reported its first profitable quarter since going public.
During the pandemic, Robinhood gained popularity as a financial technology app, attracting retail traders with its commission-free trades and user-friendly interface. However, the tightening cycle implemented by the Federal Reserve last year had a negative impact on equities, particularly high-flying tech stocks that attracted retail interest. This affected Robinhood’s business.
Since reaching its peak in August 2021, Robinhood’s shares have lost 86% of their value. The company was also at the center of a meme stock frenzy in January 2021.
In the second quarter, Robinhood reported earnings of 3 cents per share, beating analysts’ expectations of a loss of 1 cent per share. However, the platform experienced a decrease in monthly active users, with 10.8 million users compared to 11.8 million in the previous quarter and 14 million in the previous year.
To counter this decline in its trading business, Robinhood is seeking new revenue streams. The company recently agreed to acquire financial technology and credit card firm X1 for approximately $95 million.
In its regulatory filing, Alphabet disclosed that it now holds around 612,214 shares in Robinhood, compared to 4.9 million shares in the previous quarter.
The value of Alphabet’s stake in Robinhood is estimated to be around $7 million.
© Thomson Reuters 2023
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