Robinhood plans to forge ahead with its planned IPO this year despite GameStop controversy, report says

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Co-founder of Robinhood, Vladimir Tenev.


Robinhood’s controversial decision to limit trading in a handful of volatile stocks isn’t derailing its plans to go public later this year, according to a report from Bloomberg, citing people close to the company.

Robinhood has seen a surge in business over the past year as a new generation of investors flocked to the stock market amid a global pandemic that shut down professional sports leagues for months on end. 

The company had more than 13 million users at the end of 2020.

The firm, founded in 2013, is keeping its options open in terms of how it goes public. According to the report, Robinhood is exploring a traditional road show IPO, a direct listing, or a merger with a SPAC. 

The company had been planning to hold an IPO around May, Bloomberg said. 

But over the past week, the firm has received a cash infusion of more than $3 billion as it grappled with meeting deposit requirements amid an epic short-squeeze rally in shares of GameStop and AMC.

Read more: GOLDMAN SACHS: Buy these 35 stocks that are unruffled by GameStop mania and set to rally as the economic recovery gains speed.

The short-squeeze was sparked by traders who frequent Reddit’s WallStreetBets, and many of Robinhood’s users took part in the squeeze by buying shares of the impacted stocks. Robinhood ultimately restricted buying in shares of GameStop and others so it could meet its deposit requirements, the company said. 

The move angered its customers, its employees, and politicians on both sides of the aisle, as the GameStop short-squeeze has been viewed as a David vs. Goliath moment in which everyday retail investors took down Wall Street hedge funds.

Melvin Capital and Maplelane Capital, two hedge funds that were short shares of GameStop, suffered losses of 53% and 47% in the month of January, respectively. 

Robinhood was valued at about $11 billion in a 2020 fundraising round, but the IPO valuation would likely be higher based on last week’s capital raise.

Ribbit Capital led the latest capital raise with a $2.4 billion convertible note that will convert into equity at a $30 billion valuation, or a 30% discount to an eventual valuation in a public listing, whichever is lower, Bloomberg reported, citing people with knowledge of the terms.

Going public will give Robinhood flexibility in terms of securing future financing that could be used to increase its cash buffer needed to appease regulators, as well as fund growth initiatives.

Read more: Buy these 26 heavily shorted stocks as retail traders trigger wild rallies in Wall Street’s least liked names, Wells Fargo says

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Mark Cuban thanks Wall Street Bets for ‘changing the game’ after the Reddit forum fueled a meme-stock frenzy

Mark Cuban.
Mark Cuban.

In a Reddit AMA on Tuesday morning, billionaire investor Mark Cuban expressed gratitude to the members of the WallStreetBets Reddit forum.

“Thanks for changing the game,” he said. “Thanks for taking on Wall Street.”

In the past week, amateur traders on WallStreetBets have driven up the value of several stocks, including GameStop and AMC Theaters, that some hedge funds bet heavily against. The resulting short-squeeze caused trading restrictions on the popular trading app Robinhood and uproar on social media. The ongoing saga also sent shockwaves across the industry and drew scrutiny from lawmakers.

Though Cuban said that he does not own GameStop shares, his advice to those who do is to hold onto their shares if they can. 

“If you can afford to hold the stock, you hold,” he said. “I don’t own it, but that’s what I would do. Why ? Because when RH and the other online brokers open it back up to buyers, then we will see what WSB is really made of. That is when you get to make it all work.”

He also predicted in the AMA that Wall Street Bets would be able to replicate this trading pattern in the future. His advice was to change brokers, saying that Robinhood did not have sufficient capital to “fund the fight.”

“When you load back up,” he continued, “[find] a broker with TRILLIONS OF DOLLARS in assets on their balance sheet.”

GameStop stock has seen a sharp drop in value this week, and Cuban’s comments come against a backdrop of market uncertainty.

Robinhood temporarily froze trading of GameStop and other highly valued stocks last week in order to meet federal clearing house and capital requirements. The app has raised $3.4 billion since last week, but trading restrictions are still in effect, although they have been slowly loosened on GameStop.

Several class-action suits have already been filed against Robinhood. Cuban, when asked about the odds of success of the suits, was not particularly optimistic about their ability to make change. 

“You will win,” he told one user of potential suits. “And after legal fee[s] you will get your $4.00 settlement check.”

This AMA isn’t the first time Cuban has commented on the ongoing market volatility fueled in part by Reddit. In a blog post on Sunday, the investor wrote that “Wall Street and the agency that governs it, the SEC, have become fat and happy. Fat and Happy makes [the] old school slow and resistant to change.”

He also expressed his support in a tweet last week.

Cuban told CNBC on Tuesday of WallStreetBets traders that, “I think now that they’ve recognized their power and now that they’ve learned some lessons, we’re going to get more of it, not less of it.”

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Silver tumbles 7% from 8-year high as day-trader rally runs out of steam – GameStop and other hot stocks are also sliding

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Silver prices soared on Monday but faltered on Tuesday

The silver price tumbled 7% from an 8-year high on Tuesday, as efforts by retail traders to jack up the price fizzled out, and other day-trader targets such as GameStop slumped.

On Monday, silver rose as much as 13% to above $30 an ounce, as amateur investors piled into the market, causing exchange-traded funds to surge and some online retailers to restrict transactions.

The rally in silver appeared to be a continuation of the day-trading frenzy that drove GameStop shares 400% higher last week, with the hashtag #silversqueeze trending on Twitter.

Yet the rally lost impetus on Tuesday morning, with the benchmark silver futures price sliding 7.2% to $27.30 an ounce as of 9.45am ET.

Read More: Jefferies says to buy these 24 stocks that represent its analysts’ highest-conviction picks for 2021

CME Group, which runs the Chicago Mercantile Exchange, increased the margins investors need to post to trade silver futures by 17.9% on Monday, which analysts said tamped down activity.

BlackRock’s iShares Silver Trust exchange-traded fund fell sharply, opening sharply lower on Tuesday at around $25.28 after closing on Monday at $26.76.

Analysts said the rapid turn-around in the price of silver showed the difficulty retail traders face in trying to drive up the price.

Part of the energy behind the silver rally on Monday was that day traders on Reddit and elsewhere had encouraged each other to buy up the metal in the belief that major financial institutions are betting against it.

Many members of the Wall Street Bets forum criticised the idea of targeting silver, however, saying the focus should remain on GameStop. Some noted that major Wall Street banks, and the hedge fund Citadel Advisors, were the biggest holders of the iShares Silver ETF.

Read More: Buy these 4 stocks poised benefit from a spike in silver prices, says RBC Capital Markets – including 2 set to soar 73%

Bank of America strategist Michael Widmer said in a note there were signs that silver purchases “in recent days have come from both the retail and institutional space.”

Adrian Ash, director of research at precious-metals platform BullionVault, told Insider that the sheer size of the silver market was a major problem for day traders thinking of targeting the metal.

“While silver is much more volatile than gold – with wholesale volumes only one-seventh the value – [it’s] still massively larger than GameStop at $8 billion per day,” Ash said.

GameStop shares slid 42% at the opening bell on Tuesday morning to around $125.00 as the retail frenzy appeared to peter out. Movie theater chain AMC was down around 40% to around $8.

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GameStop and AMC plunge more than 40% as Reddit short-squeeze begins to fade

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The epic short-squeeze rallies fueled by Reddit’s WallStreetBets traders are beginning to unwind, based on Tuesday’s trading activity.

GameStop fell as much as 55% on Tuesday, adding on to a 31% decline seen on Monday. The stock is down 79% from its all-time-high of $483. GameStop surged more than 2,000% in January, leading to massive losses for some hedge funds like Melvin Capital, which was down 53% for the month.

The contagion in GameStop spread to another stock favored by the Reddit traders: AMC Entertainment. The movie-theater chain fell 43% on Tuesday and is down 63% from its recent high of $20.36. 

The trading activity suggests Reddit users are failing to “hold the line,” the frequent battle-cry of the WallStreetBets trading forum. But as of Monday, one Reddit user is still holding the line: u/DeepFuckingValue.

The user, who has been long GameStop since 2019, posted a screenshot of his trading position on Monday after the close, signaling that he has yet to sell his outstanding positions in the video-game retailer.

Despite Monday’s decline, u/DeepFuckingValue, who also goes by the name RoaringKitty, was still up nearly 3,000% on his GameStop position, which is made up of both common stock and call options. 

The top comment on RoaringKitty’s post on Monday was: “HOLDDDDD.”

Read More: Buy these 4 stocks poised benefit from a spike in silver prices, says RBC Capital Markets – including 2 set to soar 73%

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Silver spikes 13% to 8-year high as Reddit day traders turn their buying power towards a fresh target

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  • The price of silver jumped as much as 13%, to $30.35 per ounce, on Monday as amateur investors piled in. The metal hovered near an eight-year high.
  • The so-called silver squeeze follows the Reddit-driven surge in GameStop shares last week.
  • But the rally sparked controversy on Reddit, with users saying GameStop should remain the target.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The price of silver on Monday jumped as much as 13%, to $30.35 per ounce, hitting an 8-year high. The surge pushed up shares of silver-mining companies and causing retail sites to limit trading amid the latest attempt of amateur investors to squeeze Wall Street.

But the so-called silver squeeze proved controversial on the Reddit forum Wall Street Bets, with many users arguing the army of day traders should keep targeting GameStop shares and not shift their sights elsewhere.

Last week, traders organizing themselves on Reddit realized their power when they bid up GameStop shares by more than 200%, hitting hedge funds and others who had been betting the price would fall for more than $19 billion.

On Monday morning, the pivot towards other targets picked up speed, with the hashtag #silversqueeze trending on Twitter. Online financial personalities were cheering on day traders, with bitcoin investor Cameron Winklevoss tweeting: “If Silver market is proven to be fraudulent, you better believe Gold market will be next.”

It has risen around 17% over the last five days as Wall Street Bets members encouraged each other to buy up silver in the belief that major financial institutions are betting the price will fall.

Read more: Buy these 4 stocks poised benefit from a spike in silver prices, says RBC Capital Markets – including two set to soar 73%

The latest data from the US regulator showed money managers are betting the price will rise, however.

BlackRock’s iShares Silver Trust surged more than 10% on Monday. The world’s biggest silver exchange-traded fund saw inflows of close to $1 billion on Friday.

Shares in silver companies jumped. Miner Fresnillo’s London shares soared 17.81% while Polymetal International was 6.93% higher.

Silver retail sites were left struggling to keep up with the demand. Money Market said it would not be taking any further silver orders until mid-Monday morning due to “extreme demand”. APMEX said it was expecting processing delays of up to three days.

Yet the move into silver was controversial on the Reddit forum Wall Street Bets. Some users noted that huge investment banks, and the hedge fund Citadel Advisors, were the biggest holders of the iShares Silver ETF.

“By buying silver/going long on silver, you would be directly putting money into the pockets of the EXACT HEDGE FUNDS ON THE OTHER SIDE OF $GME,” one user posted. Others said the Reddit army should focus their efforts on driving up the GameStop share price, which was around 8% higher in pre-market.

Milan Cutkovic, market analyst at trading platform Axi, said silver is a “far more difficult” market to move than smaller stocks such as GameStop. Yet he said that “last week’s events showed that the impact of the retail frenzy should not be underestimated.”

Read more: Buy these 26 heavily shorted stocks as retail traders trigger wild rallies in Wall Street’s least-liked names, Wells Fargo says

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XRP falls sharply after soaring 50% but Dogecoin is holding on, with day traders looking for new targets and Elon Musk fanning interest

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Dogecoin is a ‘meme’ cryptocurrency, seemingly created as a joke

Cryptocurrency XRP tumbled into the red on Monday, after rising more than 50% in early trading, as a “pump and hold” scheme organized by day traders ran into trouble.

Yet “meme” currency Dogecoin held on gains of around 34% as amateur investors zeroed in on new assets in the wake of the GameStop saga and Elon Musk boosted interest in cryptocurrencies.

XRP was down 7.14% to $0.43779 by 9.50am ET. It had risen more than 50% to above $0.74 in early morning trading.

Dogecoin was 33.87% higher at $0.04007, but remained well below a high of more than $0.07 hit last week. Bitcoin, the biggest cryptocurrency by market value, was up 0.56% to $33,548.

Last week, day traders on the Reddit forum Wall Street Bets sent the shares of video-game store GameStop soaring.

Read More: A chief investment strategist breaks down how the GameStop saga could upend long-standing practices on Wall Street – and shares her 4-part advice for navigating the frenzied trading environment

The army of amateur investors appeared to have locked on to a broader array of targets on Monday, with silver hitting its highest level in 8 years and XRP and Dogecoin both jumping.

XRP is both a cryptocurrency and digital payments network created by US firm Ripple, which stumbled last year after the firm ran into legal trouble. It denies allegations of wrongdoing.

Dogecoin is a “meme” cryptocurrency created in 2013, seemingly as a joke, but which has picked up a growing following. A cryptocurrency is a secure digital currency, often without a central controlling authority.

Tesla founder Elon Musk has encouraged the recent surge in interest in cryptocurrencies. In a Sunday night video on the app Clubhouse, Musk said it would be funny if “Dogecoin becomes the currency of Earth in the future.”

Read More: As Redditors flood the stock market, UBS breaks down 6 options strategies investors can use right now to protect their portfolio

Part of the early-morning XRP price rise was driven by a concerted effort among the currency’s fans, echoing the GameStop phenomenon. A group on the messaging app Telegram called Buy & Hold XRP hit the maximum 200,000 member threshold.

Yet the strategy looked shaky shortly after 7am ET, as the price stumbled. One popular post on the XRP channel on the social network Reddit said: “Stop panic selling!! We can do this! We just had it to .74 USD, let it rise!”

Another Reddit user posted: “People that sell now are the ones that are going to be the most disappointed! HOLD.”

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Billionaire Mark Cuban says Wall Street Bets is disrupting the financial elite: ‘They want to change the game and kick their ass’

Mark Cuban
Billionaire investor Mark Cuban.

  • Mark Cuban said Wall Street Bets members are disrupting Wall Street’s old guard.
  • The billionaire “Shark Tank” star said they’re applying lessons from crypto trading.
  • “They want to change the game and kick their ass. Which they should and have every right to.”
  • Visit Business Insider’s homepage for more stories.

Day traders are shaking up the status quo by applying the rules of digital assets to the stock market, billionaire investor Mark Cuban said in a blog post on Sunday.

The “Shark Tank” star and Dallas Mavericks recalled that as a child, he once attended a stamp show where he bought a stamp from one dealer then sold it for 50 times the price to another dealer in the same room. The experience opened his eyes to the fact that traditions and inefficiencies exist in every market.

Wall Street Bets members joining forces to pump stocks such as GameStop and AMC in recent days reminded him of his stamp-arbitrage days, he said. 

Read more: A veteran options trader breaks down the intricate strategy that Reddit traders used to outsmart Wall Street’s bet against GameStop – and shares 2 ways the parabolic rally could permanently alter the stock market

Moreover, younger investors have learned from trading Bitcoin and other cryptocurrencies that they can collectively boost the prices of digital assets and generate wealth for all involved, he continued.

“WSB traders are applying the same principles of the digital/crypto world to the stock market and they are loving the fact that the old schoolers are hating it,” Cuban said. “The old schoolers think they are smarter. They are not.”

The amateur investors – a crowd that includes Cuban’s 11-year-old son – are more than happy to ignore conventional metrics such as price-to-earnings ratios and free cash flow.

“This generation doesn’t care what Old School Wall Street thinks, or says about valuations,” Cuban said. “They have learned from their experiences watching Wall Street go up and down and making people who aren’t them a ton of money, that it’s a game designed to reward the people with the most money.”

Read more: Bank of America warns of 3 looming catalysts that could send the bull market crashing in 2021 – and shares how to position for the ‘big change’ as the WallStreetBets crowd fights against the system

“That all these narratives are just sales pitches designed to sell stocks,” he continued. “They want to change the game and kick their ass. Which they should and have every right to.”

Cuban added that the trader collective could target “any hedge fund, any stock, any time, for any reason and change the game.”

He said it was the same as a major Wall Street analyst moving a stock by putting out a recommendation, but the Reddit version has “much more power and impact.”

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Michael Burry compared GameStop to ‘The Big Short’ – and said he would cash out if he won big on the stock

Michael Burry

  • Michael Burry compared the GameStop squeeze to “The Big Short” as a unique opportunity.
  • The investor highlighted the stock’s huge short interest, small market cap, and how unloved it was.
  • Burry said that if he had made life-changing money on GameStop, he would cash out.
  • Visit Business Insider’s homepage for more stories.

Michael Burry compared the GameStop saga to “The Big Short” and suggested big winners should cash out in tweets on Friday and Saturday that have now been deleted.

“There really can’t be another GME,” the investor said. “Nothing else is/was even close to as shorted (100+% of float), so small (microcap), and so hated/ignored/dismissed prior to the #thebigshortsqueeze.”

“It was a uniquely perfect setup,” the Scion Asset Management boss continued. “There won’t be another like it. Much like #thebigshort.”

Read more: Bank of America warns of 3 looming catalysts that could send the bull market crashing in 2021 – and shares how to position for the ‘big change’ as the WallStreetBets crowd fights against the system

Burry is best known for his billion-dollar bet on a US housing-market crash in the mid-2000s, which was chronicled in Michael Lewis’ book “The Big Short.”

The investor laid the groundwork for GameStop’s astronomical rally this month when he disclosed a 3% stake in the video-game retailer in August 2019, and began pushing for changes at the company.

Chewy cofounder Ryan Cohen followed his lead by taking a 13% stake in the retailer last year, and parlaying it into three board seats earlier this month.

Hordes of amateur investors, buoyed by Burry and Cohen’s votes of confidence, have seized the chance to squeeze short-sellers and make fast money by driving GameStop’s stock price up as much as 2,500% this month.

Read more: A veteran options trader breaks down the intricate strategy that Reddit traders used to outsmart Wall Street’s bet against GameStop – and shares 2 ways the parabolic rally could permanently alter the stock market

Burry highlighted the story of Keith Gill, the casual investor who goes by “Roaring Kitty” on YouTube and u/DeepFuckingValue on Reddit, in another tweet.

Gill plowed $54,000 into GameStop call options in June 2019 after determining the retailer’s stock was undervalued. He boasted $32 million in GameStop calls and shares and $14 million in cash as of Saturday, according to an unverified screenshot he posted on Reddit.

“Hey, $GME is now a $stonk and may go >$1000, but if I made a life-altering amount in this stock, I’d punch out,” Burry tweeted.

Read more: GameStop has surged more than 600% in the past week. 3 experts break down where the stock could go from here as Reddit’s army of traders take profits and search for their next targets.

“Main Street has Wall Street by the cojones. Great story/LOVE it. Tee it: bulls make money, bears make money, #pigsgetslaughtered,” he added.

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Goldman Sachs: Biggest ‘short squeeze’ in 25 years caused hedge funds to ‘de-gross’ at fastest rate since 2009

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Goldman Sachs said the GameStop saga had hit the wider market, with hedge funds rapidly cutting their positions

The US stock market is witnessing the biggest “short squeeze” in 25 years, forcing hedge funds to withdraw from their positions on stocks at the fastest rate since 2009, according to Goldman Sachs.

Last month saw GameStop shares rise more than 1,700%, “squeezing” hedge funds and others who had “shorted” the stock, costing them billions of dollars. A short position is a bet that a share price will fall.

The surge in GameStop and other heavily shorted stocks was driven by users of the Reddit forum Wall Street Bets, who forced up the price in an effort to make themselves money but also to hammer hedge funds such as Melvin Capital.

Read More: A chief investment strategist breaks down how the GameStop saga could upend long-standing practices on Wall Street – and shares her 4-part advice for navigating the frenzied trading environment

Goldman Sachs analysts this weekend shed some light on the situation in a note. “The past 25 years have witnessed a number of sharp short squeezes in the US equity market, but none as extreme as has occurred recently,” they said.

The equity analysts said a basket of the most-shorted US stocks has rallied 98% in the last three months. Estimates by data provider Ortex on Friday showed that short-sellers were sitting on losses of around $19 billion just on GameStop in 2021 so far.

Hedge funds and short-sellers who had made losing bets were forced to withdraw from the market rapidly at the fastest pace since 2009, in what is known as “de-grossing”.

They had to buy shares in companies such as GameStop and movie theater chain AMC to close their short positions, and sell other stocks to cover their losses.

“This week represented the largest active hedge fund de-grossing since February 2009,” Goldman analysts including David Kostin and Ben Snider said. “Funds in their coverage sold long positions and covered shorts in every sector.”

Kostin and his colleagues said regulations, limits put in place by trading platforms, or sharp losses could bring the amateur trading frenzy to a halt.

“Otherwise, an abundance of US household cash should continue to fuel the trading boom,” they said.

Read More: As Redditors flood the stock market, UBS breaks down 6 options strategies investors can use right now to protect their portfolios 

Goldman said retail investing was thriving because of the large amount of savings built up during the coronavirus period, as well as government stimulus.

“During 2020 credit card debt declined by more than 10%, checking deposits grew by $4 trillion, and savings grew by $5 trillion,” the investment bank’s analysts said.

“On top of these savings, our economists expect more than $1 trillion in additional fiscal support in coming months, including another round of direct checks.”

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SIGN UP HERE FOR OUR TUESDAY EVENT: A conversation with Insider’s markets gurus on the GameStop and Reddit-trader phenomenon

Gamestop.
Gamestop.

Stock markets around the world are reeling from Reddit traders’ volatile trading over the past week. How the speculative activity continues could determine whether the trend pops with little lasting impact or sparks a new discussion over economic equality.

What began as an effort to profit from a short squeeze has since exploded into a national debate on market access. Retail traders coordinating on Reddit forums like r/wallstreetbets lifted GameStop, AMC, and other highly shorted stocks, hoping to profit as funds covered their short positions.

The group ultimately beat Wall Street at its own game. Their trades drove billions of dollars in losses across short-selling hedge funds and left Wall Street’s old guard reeling.

Actions taken Thursday by several brokerages further stoked the day-trader movement. Robinhood, Interactive Brokers, and others restricted trading of the volatile stocks, arguing the moves protected them and their clients from outsize risk. Congress is now set to hold hearings on the matter as members allege the trading platforms stifled the individual investor for the benefit of the Wall Street establishment.  

Join us Tuesday, February 2, 2021 at 1:00 p.m ET as deputy editor Joe Ciolli and markets and economy reporter Ben Winck discuss the GameStop phenomenon, Wall Street Bets’ influence, and how the Reddit-fueled trade might end.

You can sign up here.

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