In recent financial news, Alphabet Inc., the parent company of Google, announced on Friday that it has significantly cut down its investment in Robinhood Markets by a staggering 90%. This surprising decision was made a few days after Robinhood announced its first-ever profit since becoming a publicly-traded company.
Initially skyrocketing in popularity during the pandemic, Robinhood has been grappling to regain its once-strong hold in the market. A large number of retail traders were drawn towards this financial technology app, credited mainly to its seamless user interface and commission-free trades. However, the company has been trying to regain its footing due to the volatile market conditions.
Last year, the Federal Reserve initiated a tightening cycle, which proved to be a major setback for equities, especially high-flying tech stocks that had a lot of retail interest. This move significantly impacted Robinhood’s overall business model.
Robinhood’s trading platform had been the epicentre of the meme stock frenzy back in January 2021. However, the company has seen a significant downturn since then, with its shares taking a massive hit, dropping by 86% since they peaked in August 2021.
Interestingly, Robinhood recently announced that it had managed to make a profit of 3 cents per share in this year’s second quarter. This came as a pleasant surprise for analysts, who were expecting the company to suffer a loss of 1 cent according to data by Refinitiv.
Despite the profit, Robinhood has been witnessing a steady decline in its monthly active users due to market volatility. The platform saw a drop to 10.8 million active users, a decrease of one million compared to the first quarter, and a whopping 3.2 million fewer than the previous year.
As a result, Robinhood, which is headquartered in Menlo Park, California, is on the lookout for new revenue streams. As part of this strategy, it agreed to acquire financial technology and credit card company X1 in June for an estimated $95 million.
Alphabet’s regulatory filing stated that as of June 30, it held approximately 612,214 shares in Robinhood. This is a stark contrast to the 4.9 million shares it held in the first quarter that ended on March 31. Based on Robinhood’s last close on Thursday, Alphabet’s stake would be worth a mere $7 million, according to Reuters’ calculations.
This news is based on an article published on thestar.com.my.