Robinhood’s 126% post-IPO rally puts its founders within reach of a $1.4 billion stock payout

Robinhood co-founders  Baiju Bhatt (left) and Vlad Tenev.
Robinhood co-founders Baiju Bhatt (left) and Vlad Tenev.

  • Robinhood’s post IPO rally of as much as 126% put its founders within reach of a $1.4 billion payout.
  • Co-founders Vlad Tenev and Baiju Bhatt stand to receive 13.8 million shares if Robinhood’s stock price closes above $101.50 by 2025.
  • Shares of Robinhood hit an intra-day high of $85 on Wednesday, just 19% below the award price.
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A wild post-IPO rally in shares of Robinhood this week put its co-founders within reach of a $1.4 billion stock payout, according to the company’s S-1 filing.

Vlad Tenev and Baiju Bhatt stand to each receive 13.8 million shares if Robinhood’s stock price closes above $101.50 by 2025 for an extended period of time. Shares of Robinhood hit an intra-day high of $85 on Wednesday, just 19% below the price needed for Tenev and Bhatt to unlock their stock award.

The $101.50 price hurdle is based on the average of the daily volume weighted average of Robinhood’s stock price for each day over a consecutive 60-day trading period.

Robinhood stumbled in its IPO debut last week, with shares falling as much as 12%, but the stock has since staged an impressive rebound and recovered all of its losses and then some. The online trading app staged a two-day rally of as much as 126% on Tuesday and Wednesday.

The 13.8 million restrictive stock units were granted to both founders in 2013, but the award terms were revised in May to extend the deadline of the award to 2025. Under the original plan, Tenev and Bhatt would have only received 20% of the stock award if at the time of IPO shares were priced between $30.45 and $50.75, according to the filing.

The company priced its IPO at $38 per share, meaning Tenev and Bhatt would have only received 20% of their stock award if the terms weren’t revised.

Tenev and Bhatt also stand to receive millions of more Robinhood shares if their stock price eventually trades up to $300 per share by the end of this decade. The co-founders were granted an additional RSU equity award, 22 million shares for Tenev and 13 million shares of Bhatt, if the stock price hit a number of price hurdles, starting at $120 and moving up in increments of $30 until topping out at $300.

All in all, if successful, the equity awards for Tenev and Bhatt could be worth up to $10.8 billion and $8.1 billion, respectively, assuming both co-founders don’t sell a single share of their accumulated equity awards after the last tranche is granted at the $300 per share level.

Read more: Top 12 meme stocks this week on Reddit: AMD and Tesla steal the show after blowout earnings reports while Square shakes up the fintech space with a bold acquisition

“The 2021 Market-Based RSUs are designed to incentivize the Co-Founders toward further growing our share price over and above the price hurdles applicable to the 2019 Market-Based RSUs,” Robinhood said in the filing.

In April, Robinhood reduced the annual salary of Tenev and Bhatt to $34,248, which is the 2019 median wage of US workers. Both were previously paid a base salary of $400,000.

Tenev and Bhatt founded Robinhood in 2013. The company has seen its business explode as millions of Americans began investing in the stock market amid the COVID-19 pandemic and government stimulus checks. Epic rallies in dogecoin and meme-stocks like GameStop and AMC Entertainment have also boosted its business in recent months.

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Robinhood extends 2-day gain to 126% as it becomes the most talked-about stock on Reddit’s Wall Street Bets forum

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  • Shares of Robinhood soared as much as 82% on Wednesday, extending its two-day gain to 126%.
  • The move higher comes as Robinhood takes the spot as the most mentioned stock on Reddit’s Wall Street Bets forum.
  • Robinhood went public at $38 per share last week, and hit a high of $85 on Wednesday.
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Shares of Robinhood surged as much as 82% in Wednesday trades, extending its two-day gain to 126%.

The move higher in Robinhood came after the online trading app stumbled in its post-IPO trades last week, with the stock falling as much as 12% on its first day of trading. Robinhood priced its IPO at $38 per share on Thursday. The stock hit a high of $85 on Wednesday amid numerous trading halts for volatility.

The move higher in Robinhood comes as retail investors talk more about the stock on Reddit’s Wall Street Bets forum. According to data from SwaggyStocks, Robinhood was by far the most mentioned stock on the forum over the past 24 hours, with more than 1,700 mentions. The next most talked about stock was AMD with only 388 mentions on the forum.

A majority of Robinhood’s mentions on the Wall Street Bets forum were positive, according to SwaggyStocks. “Unpopular opinion: Robinhood still has the best mobile interface,” one Reddit user said.

Others were less positive on Robinhood, with one user speculating that the stock “will eventually tank” if payment for order flow is banned by the SEC. Robinhood derives a bulk of its revenue from PFOF practices.

But some investors are not concerned about Robinhood’s source of revenues, including Cathie Wood’s ARK Invest, which has built a more than $250 million stake in the online trading app across three of its ETFs.

Read more: Top 12 meme stocks this week on Reddit: AMD and Tesla steal the show after blowout earnings reports while Square shakes up the fintech space with a bold acquisition

Robinhood stock chart
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Robinhood soars 29% to post-IPO high as investors like Cathie Wood’s ARK Invest build positions

Robinhood logo stocks investing
  • Robinhood soared as much as 29% on Tuesday to a post-IPO record of $48.59.
  • The online trading app is seeing buying interest from long-term investors like Cathie Wood’s Ark Invest.
  • Ark Invest has built a stake in Robinhood worth about $250 million since the company went public last week.
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Shares of Robinhood soared as much as 29% on Tuesday to a post-IPO record high of $48.59 as long-term investors like Cathie Wood’s Ark Invest begin to build a position in the fintech platform.

Robinhood experienced a choppy debut last week, with shares falling as much as 12% from its IPO price of $38 per share. The IPO was unique in that Robinhood allocated shares to its user base, allowing retail investors to get in on the ground level. That access is typically reserved for institutional investors and their clients.

While only 1% of Robinhood’s user base participated directly in its IPO, other investors appear more bullish on the long-term prospects of the online trading app.

Ark Invest has built a near-$250 million stake in Robinhood since it went public last week. Across Ark Invest’s Disruptive Innovation, Next Generation Internet, and Fintech Innovation ETFs, the firm owns more than 6 million shares of Robinhood.

But not all are bullish on Robinhood, with David Trainer of New Constructs arguing that Robinhood is worth no more than $9 billion, representing downside potential of more than 75% from current levels.

“The mounting regulatory risk Robinhood faces makes us concerned that the public may see Robinhood’s stated goal to ‘democratize investing’ as a ruse to lure them into speculative trading and gambling that benefits Robinhood more than the individual investor,” Trainer said in a report last month.

Robinhood stock chart
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Square jumps 10% after it agrees to $29 billion acquisition of buy now, pay later firm Afterpay

Jack Dorsey wearing tie-dye shirt onstage
Twitter CEO Jack Dorsey on stage at the Bitcoin 2021 Convention, a crypto-currency conference in Miami.

  • Shares of Square jumped as much as 10% on Monday after the fintech agreed to acquire Afterpay for $29 billion.
  • Afterpay is a “buy now, pay later” firm that consumers use to pay for products in installments with 0% interest.
  • Square will fund the $29 billion acquisition of Afterpay with all stock.
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Square jumped as much as 10% on Monday after it agreed to acquire Australian-based Afterpay for $29 billion in an all-stock deal. Shares were initially lower by about 5% in pre-market trades.

The deal will enable Square to add the “buy now, pay later” payment option to its Cash app payments platform, directly competing with companies like Affirm. The “buy now, pay later” payment option has been on the rise in recent years, as it allows consumers to more flexibly pay for pricey items with 0% interest and no hard credit checks.

Afterpay shareholders will receive 0.375 shares of Square for each ordinary share of Afterpay, representing a 31% premium to the company’s closing price on Friday. Square plans to integrate the payment option platform into both its Cash App and Seller platform, allowing businesses of all sizes to easily enable the buying option for their suite of products.

“Square and Afterpay have a shared purpose. We built our business to make the financial system more fair, accessible, and inclusive, and Afterpay has built a trusted brand aligned with those principles,” Square CEO Jack Dorsey said.

Square believes the deal will be accretive to gross profit growth with a decrease in adjusted EBITDA margins in the first year after the merger. Afterpay serves more than 16 million consumers and nearly 100,000 merchants globally.

After the deal closes, Afterpay shareholders are expected to own about 18.5% of the combined company on a fully diluted basis.

Square isn’t the only fintech company with its eyes on the growing “buy now, pay later” market. Following the success of Affirm, PayPal built its own BNPL payment option, and Apple is developing the payment option with Goldman Sachs, according to a Bloomberg report.

The deal is expected to close in the first quarter of 2022.

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‘Rinse, lather, buy the dip’: Here’s how 3 Wall Street analysts are reacting to Amazon’s 2nd-quarter earnings

Amazon Fresh UK store
Amazon Fresh UK store

  • Amazon’s mixed second quarter earnings results led to a more than 7% decline in the stock on Friday.
  • The company reported $113 billion in revenue, missing analyst estimates by about $2 billion.
  • Here’s how 3 Wall Street analysts reacted to Amazon’s second quarter earnings report.
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Shares of Amazon fell more than 7% on Friday after the e-commerce giant released second quarter earnings results that beat profit estimates but missed revenue estimates.

Friday’s decline represented Amazon’s worst day since the onset of the COVID-19 pandemic in March of 2020, but Wall Street analysts remain bullish on the company’s long-term growth prospects.

Amazon reported second-quarter revenue of $113.1 billion and earnings per share of $15.12, missing analyst estimates of $115.1 billion and beating estimates of $12.32, respectively.

The company said it expects revenue of $106 billion to $112 billion in the third quarter, which would represent year-over-year growth of 10% to 16%. Still, that’s well below analyst estimates of $118.7 billion in third-quarter revenue. Amazon gave a wide third quarter guidance range for profits, guiding for $2.5 billion to $6.0 billion in operating income.

As investors navigate Amazon’s results, here’s how three Wall Street analysts reacted to the second quarter earnings report.

Stifel: “Rinse, lather, buy the dip.”

“While Amazon missed overall topline numbers, the shortfall was primarily concentrated in Online Stores which includes first party sales (the lowest multiple business line). The higher margin AWS, advertising, subscription and 3P business lines outperformed our expectations, with AWS growth accelerating sequentially,” Stifel said in a note on Thursday.

The firm said the current sell-off makes for an attractive setup “now that shares are on the other side of the COVID comp reset,” according to the note.

Stifel reiterated its Buy rating and $4,400 price target, and advised investors to take advantage of the 7% sell-off.

JPMorgan: “AWS & Advertising were bright spots in an otherwise tough quarter.”

“While street estimates will come down, Amazon is still running at a 2-year compound annual growth rate of 25% to 30%, which is above its pre-pandemic growth rate of ~20%,” JPMorgan said in a note on Thursday.

The bank noted that the weaker-than-expected earnings results were driven by higher labor costs, less operating leverage on slower volume growth, and marketing costs returning to more normalized levels.

“Amazon is still catching up with strong multi-year demand and 2021 is shaping up to be another big fulfillment build-out period on the heels of 50% square footage growth in 2020. Slower growth and increased investments make the shares more challenging near-term, but we expect revenue growth to normalize more around 20% next year and Amazon’s investments in fulfillment and logistics bode well for future growth,” JPMorgan said.

JPMorgan reiterated its Overweight rating and lowered its price target to $4,100 from $4,600.

Bank of America: “Reopening pressuring sales, but just a blip in long-term penetration trend.”

“While outlook was disappointing, and bears could argue Amazon is investing in 1-day fulfillment out of competitive necessity, we think Amazon remains in a solid position, with US retail growth likely above industry growth rates (indicating continued share gains). We still think the stock set up could benefit after 4Q guidance is provided (potentially removing an overhang), when Street can likely start looking forward to more normal growth comps in 2022,” BofA said.

Bank of America reiterated its Buy rating and lowered its price target to $4,250 from $4,300.

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LendingClub soars 57% to 3-year high after reporting its most profitable quarter ever

trader, NYSE
  • LendingClub soared as much as 57% after second quarter earnings results revealed its most profitable quarter ever.
  • The personal loan provider saw revenue soar 406% to $204 million, easily beating analyst estimates.
  • Even with shares hitting a three-year high, LendingClub is still down 83% from its record 2014 high.
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Shares of LendingClub soared as much as 57% on Thursday after the personal loan provider reported second quarter earnings that revealed its most profitable quarter ever.

LendingClub’s revenue soared 406% year-over-year and massively beat analyst estimates, along with its earnings per share.

Here are the key numbers:

Revenue: $204 million, versus analyst estimates of $129 million.
Earnings per share: $0.09, versus analyst estimates of -$0.40.

LendingClub expects the surprise profit in the second quarter to spill over into the third quarter, as it guides for third quarter net income of $10 million-$15 million.

LendingClub expects $9.8 billion to $10.2 billion of loan originations in its fiscal year of 2021, along with net revenue of $750 million to $780 million. That’s higher than its previous revenue guidance of $500 million to $530 million. Analysts were only expecting $583 million in revenue for the year.

Analysts were impressed with the results, with many increasing their price targets on the company. Credit Suisse, which increased its price target to $28 per share but remained Neutral on the company, said interest income from LendingClub Bank could represent the start of an “enhance earnings trajectory for the business.”

While shares hit a three-year high on Thursday, surging to $25.56, they were still down 83% from its record high of $146 reached shortly after its IPO in 2014.

LendingClub stock chart
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Investors should sell stocks and raise cash as bearish indicators pile-up for the S&P 500, BofA says

NYSE Trader
  • Investors should sell stocks and raise cash as the S&P 500 pushes up against the 4,400 level, Bank of America said in a note on Tuesday.
  • The bank sees bearish technical indicators piling up for the index as negative divergences persist.
  • “Sell strength into the 4,400s, especially with the arrival of bearish August-October seasonality next week,” BofA said.
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Investors should take advantage of any strength in the S&P 500 and sell stocks to raise cash as bearish indicators begin to pile up, Bank of America said in a note on Tuesday.

The bank points to negative divergences and a deterioration in market breadth, or upside participation of stocks in the market, as reasons to sell when the S&P 500 pushes up against the 4,400 level. In recent weeks, most gains in the stock market have been driven by a narrow group of companies including mega-cap tech names like Alphabet, Amazon, and Apple.

“We continue to flag lower highs from the S&P 500, NYSE stocks, NYSE all issues and US top 15 most active advance-decline lines moving into late July,” BofA explained.

The arrival of bearish seasonality in the stock market is another reason to sell into strength, according to the note. “Sell strength into the 4,400s, especially with the arrival of bearish August – October seasonality next week,” BofA said.

The S&P 500 could find support around 4250 and 4100 if stocks begin to turn lower, representing potential downside of 3% and 7% from Wednesday’s close.

Along with the bearish divergences and weak seasonality, margin debt has soared to a record high of $882 billion in June. This represents an elevated risk for US stocks if margin debt ultimately peaks.

“Although peaks in margin debt don’t always coincide with highs for the S&P 500, they tend to be bearish for US equities,” BofA said.

BofA margin debt
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Robinhood prices IPO at $38 per share, valuing the online brokerage app at $32 billion

Robinhood on cellphone
  • Robinhood priced its IPO at $38 per share on Wednesday, valuing the company at about $32 billion.
  • The online brokerage app revealed surging growth in its S-1 filing amid the COVID-19 pandemic and government stimulus checks.
  • Robinhood is set to trade on the Nasdaq under the symbol “HOOD” on Thursday.
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Robinhood priced its IPO at $38 on Wednesday, valuing the online brokerage app popular with retail investors at roughly $32 billion. The Wall Street Journal first reported the pricing.

Robinhood’s IPO pricing came it at the bottom end of the price range it had initially been targeting during its roadshow of $38 to $42 per share. Robinhood last raised $3.4 billion earlier this year, with shares trading on private secondary markets at a valuation around $40 billion.

The company has seen explosive growth amid the COVID-19 pandemic and government stimulus checks, with millions of Americans becoming first time investors in the stock market. Robinhood has more than 18 million accounts and 17.7 million active monthly users.

While the brokerage firm is not yet profitable, the company saw revenue grow 245% to nearly $1 billion in 2020. That revenue growth accelerated in the first quarter of 2021, surging 309% to $522 million, according to its S-1 filed with the SEC last month.

Much of that growth is coming from options and crypto trading, two highly speculative areas of markets than often lead to either big losses or massive fortunes.

Unique to Robinhood’s IPO is the company’s decision to allocate up to 35% of its IPO shares to users of its app. Retail investors are often restricted from investing in IPOs at the pricing afforded to institutional investors.

While Robinhood’s IPO represents a big milestone for the company, there is still a long way to go before co-founders Vlad Tenev and Baiju Bhatt can cash in on their hefty compensation awards. Both founders will be awarded $1.4 billion if Robinhood’s stock price reaches $101.50 by 2025.

Robinhood is set to trade on the Nasdaq under the symbol “HOOD” beginning on Thursday.

Read more: Top 16 meme stocks this week on Reddit: Tesla tops the charts after record earnings while Chinese stocks get smacked amid brutal regulatory crackdown

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Lumber prices could spark a 18% rally in Weyerhaeuser as wood valuation suggests limited downside, BofA says

Worker loading lumber
  • A rally in lumber prices could spark a 18% surge in shares of Weyerhaeuser, Bank of America said in a note on Tuesday.
  • BofA upgraded Weyerhaeuser to a Buy rating, arguing that its valuation has little downside.
  • The bank believes Weyerhaeuser could issue a special dividend of $2 per share in early 2022.
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Shares of Weyerhaeuser stand to rally 18% from Tuesday’s close if lumber prices see a rebound going into year-end, Bank of America said in a note on Tuesday.

The bank upgraded shares of the timberlands owner and sawmill operator to Buy and reiterated its $41 price target, arguing that the company’s current valuation offers limited downside potential to investors.

“The embedded price in WY’s valuation is about $286/1,000 board feet, 18% below the $350/mbf we believe is fair on a normal basis,” BofA explained. On top of the valuation discount, Weyerhaeuser could issue a special dividend of $2 per share by the first quarter of 2022, the note said.

Also helping offer upside potential in shares of Weyerhaeuser is a potential late summer rally in lumber prices, BofA said, offering 3 reasons why the commodity could surge after falling more than 70% from its May peak.

Encouraging to the bank is Weyerhaeuser’s stock holding steady in recent months even as lumber futures plummeted after soaring to record highs. “WY has stopped going down on bad news… this suggests the worst of the near-term price declines is in the shares,” BofA said.

Still, there are risks associated with Weyerhaeuser stock despite its discounted valuation relative to peers, the bank said. Those risks include weak employment, a deterioration in housing fundamentals, and adverse regulations on the tax status of REITs, among others.

“While WY has its risks and tends to act more as a classical cyclical (best bought early in the cycle), we believe valuations on normalized lumber pricing are attractive given the shares’ relative 14% underperformance year-to-date,” BofA concluded.

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Workday falls 7% on report that Amazon has canceled its contract with the HR software company

Trader NYSE
A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 5, 2020.

  • Workday stock fell Tuesday after a report from Insider revealed that Amazon ended its contract with the HR software firm.
  • Amazon had originally announced plans to adopt Workday’s software companywide in 2017.
  • According to Business Insider, Amazon halted the plan to roll out Workday software last year.
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Workday fell as much as 7% in Tuesday trades after Insider reported that Amazon ended plans to roll out its HR software last year.

Amazon had originally announced plans in 2017 to rollout Workday’s human-resources software across the entire company, but challenges in deploying the cloud software proved to be too great.

Senior engineers at Amazon had warned about migration issues before the deal was announced, according to the report, citing people familiar with the matter. The deal struggled because the database behind Workday’s software didn’t scale as planned to fully support Amazon’s growing workforce.

Workday confirmed in an e-mail to Insider that the deal was no longer in place.

“The partnership between the two companies remains strong, with the possibility of revisiting the deployment in the future,” the person said in a statement.

“The technical recommendation to then-CEO Jeff Bezos and his ‘S-team’ of senior decision-makers was that switching to Workday would be expensive and unlikely to succeed,” Insider reported, adding that Bezos and team did not heed the warnings, “resulting in years of costly work.”

An Amazon representative told Insider that some teams within the company still use the Workday software solution, and that “the partnership between the two companies remains strong.”

Workday stock chart.
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