After Robinhood Shares Collapsed 87% from Peak and 70% from IPO, Goldman Sachs, IPO Lead Underwriter, Cuts Stock to “Sell”

It would be funny – if it weren’t so serious – how this stuff is imploding, and Wall Street, which created it, is now washing its hands of it.

By Wolf Richter for WOLF STREET.

Back in December 2020, Robinhood Markets selected Goldman Sachs and JP Morgan as the lead underwriters for its IPO. Then on August 3, 2021, just eight months ago, Robinhood went public at an IPO price of $38 a share, giving the company a valuation of $32 billion, amid enormous hoopla. The lead underwriter’s job is to create this hoopla and create demand for the shares at ridiculous valuations, and they did a great job at that. It came amid the meme-stock trading mania that Robinhood catered to, and crypto trading that Robinhood was getting into.

But on the first day of trading, July 29, 2021, shares closed below the IPO price. Over the next few days, the stock meandered higher, and on August 4, it spiked for a moment in an incredible meme-stock paroxysm to $80 a share, and that was it.

The collapse of the share price over those eight months has been spectacular, right there with the collapse of the EV SPACS and other creatures of our time. The shares are now down 87% from the high and are down 70% from the IPO price (data via YCharts):

And this is the moment, after the stock collapsed by 87% from its high and mauled nearly every retail investor that touched these misbegotten shares since August 3, that Goldman Sachs with its usual impeccable timing cut its rating to “sell” from “neutral” and cut the price target to $13 a share.

Goldman analyst William Nance cited the “fading retail engagement” and ongoing weakness in account growth and fading hopes for profitability.

In 2021, Robinhood had a net loss of $3.7 billion, on $1.8 billion in revenues. Which was fascinating – how a brokerage platform could generate such huge losses of twice its revenues during some of the craziest stock and crypto trading ever.

Robinhood is unlikely to become profitable in 2023, based on current trends and headwinds, Nance said. “We believe this lack of clarity around the path to profitability will prevent the stock from re-rating higher.” A “key requirement” for the shares to re-rate higher, such as an upgrade to neutral, or whatever, Goldman would need to “see an acceleration in user growth.”

So user growth is “depressed,” and it could take longer to get to profitability, if ever, and that’s suddenly the problem for Goldman, not the $3.7 billion loss last year, or the ridiculously high pump-and-dump IPO price just eight months ago.

Robinhood tried to boost growth by announcing in March that it would extend its trading hours and eventually would introduce 24-hour trading. But trading isn’t fun unless the stuff being traded goes up. And many of the stocks being traded by enthusiastic meme traders and working-from-homers between Zoom meetings and actual work has formed the now vast body of imploded stocks, including Zoom itself, which has collapsed by 75%, and Robinhood which has collapsed by 87%.

It would be funny – if it weren’t so serious – how this stuff is imploding, and Wall Street, which created it, is now washing its hands of it.

While Robinhood’s cryptocurrency trading has “much better” economics, Nance wrote, the recent decline in trading volumes is a problem.

Why sure. It’s not fun trading cryptos either when cryptos are getting beaten up. Bitcoin at the moment is down 26% year-over-year and down 36% from the November high. Crypto trading is only fun when this stuff goes up. And fun is what the Robinhood platform is all about. Plow your stimulus checks and PPP loans into trading meme stocks and cryptos and have a huge amount of fun becoming a multi-millionaire in no time.

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  133 comments for “After Robinhood Shares Collapsed 87% from Peak and 70% from IPO, Goldman Sachs, IPO Lead Underwriter, Cuts Stock to “Sell”

  1. 2banana says:

    So…..

    It’s time to buy!!!!

    • John Apostolatos says:

      Yes, it is always time to buy for bag holders. Goldman is out in force telling people to get back in the water and ignore the dorsal fin.

      • CrazyIvan says:

        And the dorsal fin belongs to Goldman

        • Cas127 says:

          Vampire squids don’t have dorsal fins.

          I think we can retire that whole “reputational effects” concept now.

          But more seriously, who are the rich Goldman “customers” who are so ignorant of Goldman history, who think they themselves won’t be tossed into the wood chipper the second it serves Goldman’s interests?

          You can only dump on so many people, so many times.

          It would be very interesting to hear theories as to how Goldman actually makes its “Flywheel of Foolishness” actually work.

          (I *really* wanted to use another F word rather Foolishness, but I am trying to be a better person).

        • Rg says:

          I try not to listen to any Goldman analyst opinions. Goldman has a reputation of actively betting against its customers and putting out financial disinformation while they take the other side of the trade.

    • Harry Houndstooth says:

      Bid $250 for authentic Wolfstreet mug

      HarryHoundstooth at yahoo dot com

      Current Ask $525 (dependent on confirmation of seller)

      • max says:

        Mr. Wolf should make another mug:

        I trust in SEC

        U.S. Securities and Exchange Commission (SEC)
        The primary purpose of the SEC is to enforce the law against market manipulation.

        • HiFi_MD says:

          And they’re terrible at it.

        • Bruce says:

          JP Morgan who gets caught manipulating the markets including gold and silver.
          If you get caught there shouldnt be fine just a five year jail term including the one at the top.Jamie Diamond.They should also be made to bend over so every crim can have a go for all the people they have screwed.

        • OSP says:

          “In FED I Trust”

        • Burn ByTheSEC says:

          The SEC didn’t see Madoff, Enron and the they definitely will not see Goldman or any of the other manipulators in the market.

      • Sit23 says:

        Q. Will Wolfstreet mugs go up in value?
        A. Quadrupled in value since I bought it. Wanna buy it?

    • dang says:

      Suddenly risk matters, the punch bowl has fallen two centimeters below overflowing. I saw Jeremy Siegal from Warton business school, where Trump graduated from on CNBC. You have too listen to Dr. Siegal when he gives his opinion.

      His opinion was the 100 B per month is way too slow.

      Isn’t there a trillion on the overnight repo ? Absorbed a year from now ? His point was with 4 Tr of liquidity, 1 T is unlikely to reign in the animal spirits, which have been, apparently out of control for some time.

      • dang says:

        I feel like we are already in a recession. Just a personal radar, probably wrong. But I will tell anyone who has their life savings in long term bonds or bond funds they should consider selling. The losses are not over, in my opinion, which is worth diddly.

        The finance and economics that I studied was irrelevant 25 years ago. Consider the source.

        • dang says:

          Inmy OPinion, Inflation is a destructive financial tumor on the very rights we have fought and died for, as illucidated in a famous historical document by Thomas Paine called the pamphlet. The basis is an opposition to the exra ordinary rights granted to the roilty by right of birth and nurture. From the very beginning, starting with George Washington.

          The pamphlet written by Thomas Paine is a historical document available online.

        • dang says:

          Convexivity is another tripwire for bond holders to be aware of, which is actually playing out now.

          The lower the interest rate the greater proportional impact on price a 1% change in the market value of that security, For instance at ,001 % interest rate an increase of 100 basis points to 1.001 % would automatically make 10 year bonds worth a lot less. Now a 100 bps rise in a normal market paying 6 pct would reduce the capital loss to less than 20%.

        • Flea says:

          It’s called a rolling recession

    • pat says:

      Goldman executives face jail time for assisting in market fraud to RobinhoodWINK retail investors … No accountability in a kleptocracy. Take them down

  2. 2banana says:

    They could allow trading in Russian stocks and currency to get a market differential over the big trading houses.

    And allow OTC trades.

  3. Pilot Doc says:

    Know a guy who retired last year and put his entire nest egg in RH. Told him not to. Hilarious really. Robinhood: steal from the rich and give to the poor. Even the name was a mockery. He’s broke…

    • Cas127 says:

      “Even the name was a mockery.”

      Right up there with “Ally” – the rump financing unit of GM, which itself received a massive taxpayer bailout, declared BK, screwed bondholders, but sheltered the politically powerful union.

      Of course, they could have called it, “Boot Heel” or “Aristocrat” or some such.

      • Apple says:

        So the financial analysts at Ally are union?

        Do you think unions are responsible for all of the problems in the business world?

        • Motorcycle Guy says:

          Apple,

          I was in college from 1978 to 1981 getting a Business degree.
          During one of my Economics courses the professor was saying that a nation could not have high unemployment, high inflation and high interest rates all at the same time.
          He was historically correct but not for the times we were/are living in.
          I did my own research to find out why his very accurate comment was no longer true. Do you remember (if you are my age) the old tv commercial with Joe Montana just after the S. F. 49ers won the Super Bowl?
          The announcer asks, “Joe, you just won the Super Bowl, what are you going to do now?” And Joe replies, “I’m going to Disneyland.”

          The announcer could have asked that same question to recently laid off UAW members and gotten the same answer. The UAW had negotiated in their most recent contract that their members would receive 95 percent of their prior year’s pay for up to one year when they were laid off.
          Needless to say, in addition to getting full pay for a year (it’s now up to FOUR years last I checked) they could earn extra money by cutting lawns or plowing snow off driveways. You get the picture.

          So, that’s how the US economy can now have high unemployment, high inflation and high interest rates.

        • Augustus Frost says:

          I believe that economics professor was wrong. There are and were about 200 UN members and none of them ever had that combination?

          He must have been referring to the US or OECD members.

          These countries aren’t exempt from economic reality either.

          His claim was ridiculous, whether it had been true up to that time or not.

        • Apple says:

          I think Koch brothers ( well the live one ) pr has gotten to you. It’s not the union that take unfair advantage of corporations.

          Contract negotiations are negotiations. For the union to receive a benefit, they trade for something the company wants. It’s not one sided.

          Now if any individual attempts to negotiate with a company, they will kick him to the curb and do their best that no other company will hire him. The Koch brothers will make you believe this is capitalism and the preferred state of the economy.

          I think you might be old enough to be on SS or Medicare, something the Koch’s are attempting to remove ( “welfare for old people sucking the country dry” ) as you may have heard Senator Romney float the idea of raising both ages to 70. They want to get these older folks back to work and producing.

      • Rg says:

        Actually it was the GM bonds that went bust thanks to Obama’s plan to benefit the unions. Ally was actually the old financing arm (GMAC) and they got bailed out. I know because I had a GM bond and my Dad had GMAC bonds.

        • Rg says:

          PS. I’m very thankful that the GMAC bonds got bailed out because my mom and dad were living off the interest. At one point the bonds were trading somewhere around 50 cents on the dollar and I was quite concerned GMAC would go under.

      • Maddox Throckmorton III says:

        “It’s a travesty of a mockery of a sham of a mockery of two mockeries of a sham.” W. Allen

    • ace says:

      you have to be kidding…

    • Saltcreep says:

      RH (the ticker) is Restoration Hardware, and is a brand that sells overpriced furniture and fittings to the wealthy. It has huge margins resulting from selling to the price insensitive classes. Probably quite a safe nest egg…

      • PhilM says:

        Saltcreep.. depends when that nest-egg went into Restoration Hardware. The last quarterly #’s were horrendus. The stoc currently trades at around $335/share off of down from a high of $744 last August. A 50% haircut over the past 6-7 months is still painful regardless of the entry price though.

        • mike says:

          RH was buffett sponsored Short-Squeeze now over. One of them bubble stock. RH has only 22M shares outstanding, so it’s very thinly traded and made good on squeezing shorts.

          Let me show you RH replicas which are exact same number wise.

          High near 750 (Either real price or proportional price) currently 350

          MSFT(on its way), ADOBE, WIX, WAYFAIR, ETSY, COUPA, EPAM, SP, FB, NFLX, SP GLOBAL…etc…etc

    • RH says:

      Robinhood was bad. However, just wait until late 2022 or early, 2023 to see which was the worst investment of the 21st century: mainland China’s only forex reserves are held by the government, so to pay debts denominated in US Dollars or Euros, Chinese companies must get them from those reserves, which are inadequate in comparison to the oncoming demand for such reserves. (Mainland Chinese are not allowed to hold US dollars or other foreign currencies, which must be turned over to the government controlled banks and become part of China’s reserves.)

      Anything that eats those reserves means that there will not be enough forex reserves to pay Chinese bonds denominated in foreign currencies, loans, dividends, etc. Naturally, when that happens, foreign investors will be the first ones prohibited from taking out their profits in China by exchanging those profits into foreign currency.

      The Remimbi is depreciating due to all the economic and biological issues in mainland China. Thus, to get more forex reserves, they will have to sell what assets they have at what are effectively depressed prices.

      Chinese currency is known to have been overprinted for years even more than the US dollar, even ignoring the counterfeiting. If investors start to withdraw their funds or refusing to fund Chinese companies when the PLA starts to get more frisky with Taiwan or Japan, etc., Chinese companies will not be able to pay for materials, debts payments, etc., in hard, foreign currencies because China’s forex reserves will not be sufficient. A Taiwan invasion will result in China’s rapid default on its debts.

      China may be preparing for that. The hilarious thing is that many countries are actually having their currencies printed in China! See “China printing foreign currencies on huge scale, secures contracts for production from Belt-Road countries: Report” in firstpost. Anyone else suspect that the notoriously corrupt CCP might also secretly print “extra” foreign currency (to keep secretly) without telling those gullible countries? I guess those countries will collapse economically too.

      • RH says:

        One more thing, if you think that the holdings in real estate, etc., of the CCP crooks all over the world will be sold and brought back to China if China faces defaults on its debts, to help China, you really do not understand the CCP. LOL

        Also, the foreign direct investment in China is about equal not to the forex reserves of China. Thus, if foreign investors in China start to withdraw all of their investments and profits as some foreign investors in Russia might have wished to, you must understand that at some early point, the CCP will prohibit such withdrawals to keep forex reserves for other uses like importing raw materials or food.

        Finally, the CCP has clearly abandoned reform efforts, so until it collapses China, it will keep spending and spending and spending on more infrastructure and useless garbage. Some day in the future, if they keep it up and avoid collapse, presumably every poor, starving, Chinese village will be linked by high speed trains zooming up to billion-dollar train stations, which will be uneconomical unless they charge each passenger $50000 per ticket. LOL

        I used to regret that California never built high speed trains. After learning about those white elephants’ cost and other economics, I say: thank god!

        • Robert Hughes says:

          Ah, but someday, maybe, you will be able to go from Bakersfield to Fresno in only 2 hours. Such progress and this marvel of a train line will only cost 60 billion or so.

          Vastly over any estimate or budget and already years late. Who knows when and if it will ever be operational. In comparison makes the wasteful projects in China that actually get built and operate not look so bad.

        • Anthony A. says:

          Robert, maybe Cal should have hired the Chinese to build that high speed train?

        • RH says:

          Please keep that idea quiet, Anthony, or we might wind up having to pay for a high speed train from SD to SF that costs $100,000,000 per mile in a few years. Anyone who moves to California will then have to automatically declare bankruptcy as soon as they unpack. LOL

      • Flea says:

        North Korea has been counterfeiting U S dollar forever protected by china

    • Flea says:

      Got name of company wrong ,should be hood robin

  4. Phoenix_Ikki says:

    Note to FOMO buyers, please see your NFTs and Crypto to save this stock and many like it. This is the perfect buy the dip moment…once in a life time for sure.

    Not that we need anymore real life examples but here’s another one on full blast to illustrate the destructive power of simply horrendous monetary policy over the last decades…this is text book of when you make capital extremely cheap for people and normal risk assessment goes out the window.

    • Tankster says:

      I’m buying it turtles all the way down. It’s a great bolt on to Schwab or whoever. Long HOOD

  5. TimTim says:

    One’s naivety getting the Edward II treatment isn’t fun…

    But for those worthy of ongoing participation in the gene pool, instructional.

    • TimTim says:

      And no, merely the grimness of the scene implied, not any underlying prejudice to the perceived principle for which said king received said treatment.

      Just to be clear

      • VintageVNvet says:

        reference probably not understood by most,
        even on here,
        in spite of the screams that some can still hear

        • Lily Von Schtupp says:

          Supposedly he didn’t succumb to the, erm, hot seat and made it to the near 1330s.

          Still a good 600 uncomfortable years before the invention of Tucks pads though.

    • dang says:

      Often, one’s naivety is a virtue that overcomes an unscrupulase ruler’s unjust demands. I just hope the next generation is smarter than we were.

  6. phleep says:

    RH is trapped in the shallowness of its whole promotional game. It is like a generation of kids raised on super-sugary cereal sprinkled with meth.

    They thought they had it all over on us old-school fools.

    Thiel is out there raging against the “gerontocracy” and calling for revolution. Sitting on his vast stash, he hasn’t run out of cash quite yet, as so many of his fanboy bag-holder suckers are in the process of doing. Smart of him to sell out early, and not stay all-in on Palantir.

    • dang says:

      Well if I had a description of my opinion of the economic snake oil referred to as QE 1,2,3,4,5,6, and seven

      Not sure I heard a more succinct description:

      a generation of kids raised on super-sugary cereal sprinkled with meth

      • dang says:

        Trump’s guns and butter economy, dumped on Biden, is coming undone for the very reason it was a bad idea in the first place.

        There are many phrases from our culture that eventually seem to be varified, like money can’t buy you happiness.

        QE was a bad idea that, like a virus that escaped from the lab or a virulent hacker attack, destroyed that which was good and bolstered that which was bad.

        • dang says:

          One of my best recent realizations that contradict my smugness was the wisdom of the industrial midwest states that rejected the so called democrat and put a perfect example of privelege for us to inspect, in the White House.

          Bravado triumphs Bravery.

        • dang says:

          Whores only work to make money, often not paid enough and abused. They may make more than a Walmart associate, if they’re attractive. Since we are exploring the foundation of macroeconomics with a microeconomics example.

          They provide a socially beneficial service, catering to the testosterone levels that could become ,,,,,,,

          The idea that they’re not necessary, which they are, as central players in this comedy of life.

          Is something I’m worried about at this moment.

        • dang says:

          Thanks to Wolf for allowing me to carry on his site. I would just like to add a parting thought

          The only real gift is life. For free, do with it as we may.

          Rock and Roll will never die.

    • JM says:

      Robinhood ticker is HOOD. So many people here referring to it as RH (Restoration Hardware) speaks volumes about their stock financial literacy.

  7. Djreef says:

    That’s because Goldman is buying.

  8. Mike says:

    Wait till wall street washes it’s hands off of FATMAAN.

  9. Shott3r says:

    Given Robin Hood’s business model of letting big dogs front run its retail traders, I don’t have any sympathy for them.

    • Depth Charge says:

      Robinhood’s market maker is Citadel, where the impossibly corrupt and despicable Ben Bernanke is employed. The whole point of Robinhood is to allow Citadel to front run all of the RH gamblers so they can just milk them to no end. And if things ever get sideways and the Robinhood lemmings actually start winning a bit, like when that hedge funder from Florida got caught in a massive short squeeze, Citadel just changes the rules mid-game and forces RH to do their dirty work by locking them out of certain trades.

      • Lily Von Schtupp says:

        And that Bernie Madoff came up with the idea of Payment For Order Flow…. a broken clock is profitable twice? Albeit briefly…

  10. Augustus Frost says:

    Look at the bright side of things, HOOD still has almost $10B of market cap to lose.

    They might be able to reach profitability by drastically cutting expenses. But unfortunately when the mania ends, their revenue is going to collapse too.

  11. JWB says:

    Another instant Wolfstreet classic:

    “and other creatures of our time”

  12. Anthony A. says:

    I’d love to know who much money Goldman made on the IPO and any special stock they got and unloaded.

  13. Dave Mac says:

    A company with a business model of pushing overpriced stocks and cryptos is going to struggle very badly in a global recession.

    This explains the plunging price of RH.

    Burn baby burn!

  14. Ridgetop says:

    Wolf,
    On a side note. I sent you my annual donation, $115, I upped it from $100. As we all know this years inflation rate is not 7.9%, it is closer to 15% if not more, it is really only worth $100 thanks to the Feds bullshit and government overspending.
    Keep up the great work. Stay safe.

    • Enlightened Libertarian says:

      I would like to add a companion mug to my Wolf Street “Nothing goes….”
      I want a “Wolf Was Right” mug. I bet someday it will be priceless.

    • Wolf Richter says:

      Ridgetop,

      Thank you for the very generous donation and the inflation adjustment 😍

  15. Anon1970 says:

    I want to thank Robinhood for driving down stock commissions to zero.

    • robert says:

      That happened a long time before them.

      • Anthony A. says:

        RH actually gave you a share of stock if you signed on with them. No one else did that.

      • Anon1970 says:

        According to this fool.com article, Robinhood was the first brokerage firm to offer zero commission stock trades:

        I have been using limit orders for all of my stock trades for many years.

        Since the Great Recession, the spreads between the fed funds rate and margin loan rates have widened substantially. Margin interest is a major source of revenue for retail oriented brokerage firms.

    • Motorcycle Guy says:

      Anon1970,

      I’m glad I retired as a Stockbroker on April 1st 2014 before that happened. Even though I had shifted my business to mutual funds long before then.

  16. SoCalBeachDude says:

    Easy come, easy go. What’s taking GameStop and AMC so long to go?

  17. Brent says:

    Robinhood stock 87% loss in NINE months ? I call this process rather glacial.

    Sort of Leaning Tower of Pisa which is still standing after leaning for the past 500 or so years.

    That’s for Beardstown Ladies Investing Club (Midwestern Grandmas leisurely buying/selling stocks while sipping herbal teas in the ’70s)

    Meanwhile the new craptos are exploding like fireworks gaining >>100% DAILY.

    Past 24 hours:

    Sakura Bloom +487.50%
    Web3D All Best ICO +200.67%
    Ratscoin +140.92%
    Gera Coin +134.53%
    …………

    • Anthony A. says:

      Somehow I missed the boat here. I should have started a Crypto for old men only. Maybe could have named it “GeezerCoin”. Do I still have time?

      • Brent says:

        “It is not advisable, James, to venture unsolicited opinions. You should spare yourself the embarrassing discovery of their exact value to your listener.”
        (Evergreen quote)

        Well,since you asked,my advice is DONT START.The only exception is if you are a big time investor with >$100M of Other People’s Money laying around.

        THEN you can move crypto markets up and down on a daily basis and steamroll/rug pull the sh…t out of the small fry.

        UNTIL even bigger trader with $1B steamrolls the sh…t out of you 😀

        As a substitute for money cryptos became useless.Around 2016 alphabed agencies mastered Blockchain Explorer and started busting dark net markets on a regular basis.

        I can’t think of anything which can’t be bought with the good old USD, provided you know what you are doing.

        Cryptos as a store of value ? Please…
        20 years ago when Central Banks in the West tried to abolish gold I bought 2 Gold Eagles for $280 per oz.They are still in my gun box,best friends of my G19.Thats the store of value !!!

  18. roddy6667 says:

    I’m looking for a source of inexpensive neon lights. I’m making a giant “I told you so” sign.

    • DR DOOM says:

      Have you not heard? Vlad the Mad has all the Neon gas and he ain’t been feeling much love from the west. Better string some cheap Christmas Lights together to make your sign.

    • Dan Romig says:

      Right below # 10 Neon is # 18 Argon.

      I keep a good supply of argon squeezed nice and tight in a cylinder next to the TIG machine down in the basement. Argon makes useful blue-green lasers also; they work well in sea water.

      Best part about argon, is that it’s everywhere in the atmosphere. 500 times as abundant as neon.

    • Wolf Richter says:

      roddy6667,

      I went through this wholesale destruction of highfliers in 2000-2002. It’s a horrible place to be. It’s a spirit-crushing place to be. I wish this on no one. And I try to share my thoughts here.

      So please don’t gloat. This is bad enough as it is. These retail investors got taken to the cleaners. And I feel for them.

      But there is something systematically wrong with the system where Wall Street creates these IPOs and SPACs that then implode one after the other in months. This is what I’m trying to point out.

      • JJ says:

        Why isn’t the SEC more forceful in going after these dishonest hype and hoopla carnival barkers? The SEC always seems toothless and castrated where it counts. Madoff being another small example given the scale of fraud in so many other places.

        • Snickers says:

          Well because some fool”s and their money should be instantly separated.
          Is that not the market thievery creed?

        • Augustus Frost says:

          No one can fix greed or stupidity. That’s what exists here, no matter what rationalization is used.

      • Confused says:

        Most publicly traded US corporations are incorporated in Delaware or Nevada because the corporate governance laws of those states permit management to screw the shareholders to the wall. For example, those laws make it difficult to remove directors who aren’t properly supervising the corporation’s officers. Furthermore, how many times have you seen someone on TV described as “Chairman and CEO” of X, Inc.? As Chairman, he gets to supervise himself as CEO. The first reform must be enacting federal corporate governance laws that apply to corporations whose stocks are traded on US stock exchanges.

        • Flea says:

          Warren Buffett ,just has to be honest

        • AverageCommenter says:

          Delaware Court of Chancery is a big reason why corporations are headquartered there. It’s favorable to corporate interests. Outside of this omission, the rest of your comment is pretty accurate

      • Bead says:

        Most of us get the first investing lesson right in the chops and you must admit the naïveté is funny. Funnier still if those rookies got to crow for a time. I’m thinking of that draftkings doofus.

        • JJ says:

          Bead, believe me when I say I’ve taken some decent knocks during the 2001-2002 crash myself along with blowing a few small forex accounts in the years thereafter. It’s not new to me.
          Having said this, I still think the SEC should be far more aggressive on the hype and hoopla machine even if the investment banks crow that the rewards from hype’ing and hoopla’ing is a crucial function to incentivize underwriters to perform their duties in raising capital.
          Punishing dishonestly misrepresenting the value of something
          and helping to protect investors should be meaningful social goals, too, I think.

      • roddy6667 says:

        I lost everything in the early 90’s crash. Divorce, foreclosure, bankruptcy. I was one of “them” back then. Too bad there is no way to warn people against the mistakes others have made. Maybe a financial blog or a book. Maybe a sitcom. They probably won’t listen. Too busy loading up on ARKK and Bitcoin and million dollar crapshacks.

        • Wolf Richter says:

          Yes, you nailed it. No one listens. No one wants to hear this. They all have to go through it themselves, just like we did. I didn’t listen either. I blew off these old fossils that didn’t know what they were talking about and were stuck in a time that no longer existed :-]

  19. Zark Muckerberg says:

    Though I didn’t use their app, I liked that this company offer free trading. That is until they purposely block users from buying GME. Boo!

    • jon says:

      The company does not really offer free trading. It sells your trading data to other companies which front loads your market.

      If you think company is giving you something for free then assume you are the product.

    • Fromks says:

      Exactly. I sold everything and closed my account after Robinhood removed the buy button from certain stocks. They’re not even trying to hide the rigging of the game.

  20. Wolf I thought you might comment on the new sell rating on Rite Aid, (you’ve covered Walgreens in the past) The new price target on RAD is $1 and a sell rating. Not sure how many reverse splits were put in place, (was this stock ever $1000?) and Robinhood can still go that way. Factset has a target of 5000 on the S&P and most of that is consumer discretionary.

    • Wolf Richter says:

      Ambrose Bierce

      Yes, the Rite Aid chart is crazy. I can’t remember why it spiked like it did during the dotcom bubble. Maybe it got a .com website and someone at Merrill said it would start selling prescription drugs over the internet or something crazy like that. The Amazon of drugs or whatever.

      There are other dotcom spikers still out there after big reverse stock splits. MicroStrategy [MSTR] is one of them, now fallen bitcoin angle. Back then, it spiked to about $2,000 (reverse stock split adjusted). Now it’s trying its luck with bitcoin. But this time, it’s leveraged, it’s issuing bonds to buy bitcoin. That won’t end well. Bondholders have rights, unlike stock holders.

      • JJ says:

        It’s even worse than that for MSTR. Some of the reports I read lately said they are putting up their own bitcoin as collateral to buy more bitcoin. Not 100% sure on the veracity of this.

  21. DanS86 says:

    Robbin’ The Hood!

  22. unamused says:

    “washed its hands off it”

    ‘Washed its hands of it’ is the correct idiomatic expression.

    I find French idioms challenging. One can swear up a storm without ever using a swear word. Italian expressions can mean different things depending on intonation and hand-waving styles. One has to be careful.

    Goldman Squid has noticed, in passing, that the livestock are grumbling.
    I believe I myself am considered something of a pig.

    I need fresh animal metaphors.

    • Saltcreep says:

      I’m the swine behind the pearls, and I know this is not the plaice to carp, but after beavering away I fail to farrow any further ideas. All I have is that within two shakes of a lamb’s tail I’m drawn like a moth to light to parroting a view of lemmings that doesn’t fly.

  23. FrmrBayPoor says:

    So, I worked for Robinhood, less than 2 years. When I started, I thought my employee RSU grant that was priced at 10 bucks a share or so was kind of rich and I wondered if that was going to be ever worth anything. after a crazy ride to the IPO, I was happy that they lifted they lock up for a few days for employees right after the IPO and then again after three months. I dumped everything and made a pretty nice windfall, I never caught the high price of $80 but I finally managed to buy a house in the Bay Area. apparently that’s what it takes. The last piece I sold before i moved to another startup early this year at $13 or so…. I have a lot of colleagues who sold nothing and basically just got stuck with a six-figure tax bill.

    • Jake W says:

      wait, why would you be taxed on gains if you never sold?

      • Fmrbaypoor says:

        You are taxed for RSUs at the liquidity event – the IPO. It is income when you actually acquire the shares then. So you get taxed at the liquidity price. At the IPO it was 38. They sell to cover some, but often not enough. And then you’re stuck with a huge tax bill

      • Ryan says:

        Not sure how Robinhood’s employee stock plan is structured, but the Alternative Minimum Tax applies to unrealized gains when incentive stock options vest whether or not it is sold. This was a huge problem for many tech employees in the wake of the dot com bust.

      • Jim Sup says:

        You still owe a tax on the delta between the exercise price and the price of the shares upon exercise. So if your exercise price is .10 cents and the FMV price is .80 cents, you will owe .70 cents per share tax. If you then sell them for $1.60, you will owe tax on the .80 cents per share.

      • Sean Shasta says:

        Here is my understanding at a high level.

        With some types of RSUs and employee stock options, taxation is a 2-step process.

        You automatically have to pay taxes on the differential between issue price and fair market value or market value (fmv or mv) on the vesting/exercise date.

        There is further taxation if you sell the stock at a profit – this is the actual capital gains.

        So if you vest/exercise the RSU/Stock Options and don’t sell it above the fmv/mv – you incur the first taxation but not the second.

        And if you vest the RSU/Stock Options and sell it over fmv/fmv, you incur bother first and second taxation.

        • Sean Shasta says:

          Jake W – my response to your question…

        • Fmrbaypoor says:

          No, Sean, that’s for stock options. When RSUs vest, it is ordinary income taxed at the vesting date. At the IPO, the company usually sells enough taxes to cover at 22% rate. Ok so say you had shares worth a mil vest at the IPO date. You had 22% sold. Your fed tax liability ends up being 38%. Shares are only worth 200k when tax day comes around… so you sell shares for $11/share because the IRS booked ordinary income at 38/share and you need to cover. happened to Uber employees too and they even brought a class action against the co.

  24. curiouscat says:

    Question in all seriousness. Is cash still trash? Why or why not?

    • Wolf Richter says:

      Dalio has been mouse-quiet about it so far this year :-]

      The thing is, cash is trash until it’s king.

    • cb says:

      It has steadily progressed towards trash for the last several decades. Used to get a 10 cent candy bar.

      • VintageVNvet says:

        Nickel for ”original” coke,,, nickel for ”full size” baby ruth candy bar cb!!!
        Used to be dropped off at the Saturday morning movie for kids with one quarter: dime to get in, nickel for coke, nickel for jujubes, nickel for candy bar
        For some reason, mom and dad wanted all us kids out of the house for a couple hours almost every saturday morn…LOL
        then pepsi came along with their slogan, ”twice as much for a nickel too, pepsi cola is the one for you.”
        and the cola wars began — early fifties maybe??

  25. Dorothea Lange says:

    What isn’t mentioned about Robinhood is 1) how horrible their customer service is (on a par with Comcast), and 2) for crypto traders it’s been nearly useless because you couldn’t withdraw most cryptos to an independent wallet. Instead, for many, until yesterday, coins were stuck on Robinhood, which suffered from egregious glitches and trading pauses in the middle of some of the biggest movements in the market. People literally could not trade when price movement was at its most volatile. This on top of KYC requirements hoops to jump through that are more onerous than even Binance, Coinbase, or the rest. Needless to say, the wallet thing was not a popular idea. Combined with the other excellent points in Wolf’s article, it probably contributed to HOOD’s decline.

    • Flea says:

      Loot lame totally manipulated to save chinese billionaire,this whole world in f ****** d up casino with only one side winning

  26. Mike says:

    GS created a “product” and delivered it to the “market” successfully: pawns. Then pawns got eaten by sharks waiting in the water for them. GS got paid: $16B in the last quarter with 50% margin. So many innovative, startups and SPACs are now without cash, butchered, in the dust…without access to cash, of course. Opportunity lost for our country, opportunity given to the EU and the Chinese of course, as always…(they will pick up the good ones on the pennies and resell goods/services to us at a premium to us later. End of circle.

  27. SocalJimObjects says:

    Old Robinhood: steals from the rich and gives to the poor.
    New Robinhood: steals from both rich and poor alike in order to get rich.

  28. CanCan says:

    Short covering rallies are no longer a new game in town. Why do they need to study stock valuations , commodities and bond plays in uncertain times if they can perhaps engineer a short covering rally.

    I am sure they can find an ex rocket engineer or two to the precision planning and timing required….

  29. polistra says:

    Robinhood wasn’t meant to be profitable, and it wasn’t meant to provide a service to its customers. It was meant to provide info on its customers to Ken Griffin so he could frontrun the sucker moves.

  30. John Stotes says:

    I disagree, I think it is hilarious. These retail knuckleheads were warned they were just gambling, and they told the professional they were old dumbys that didn’t understand how the world was changing. They deserve to lose their money, and if they don’t people won’t learn, gambling on the stock market is dangerous.

    As for Goldman’s Equity Capital Markets (EQM) group is for professional investors (not retail knuckleheads), they are paid to promote the IPO, so if we all know they are biased to sell the deal. It is their job, like you won’t expect a Ford salesman to tell you a F-150 is overpriced. Now Goldman’s research division, also for professional investors, not for retail knuckleheads, is supposed to be independence of EQM/Investment Banking. You can rightly be skeptical of that independence and most professionals are, and don’t really take stock rating very seriously (hence when why upgrade and downgrades rarely move stocks anymore). But according to your article, they never once said buy, in reality, neutral really means don’t buy, and sell means “short,” which is a brave call in with all the retail stupidity going on. And price targets linked to a neutral are also meaningless as they are required to be close to the current price. Buy and Sell price targets are the only ones with information.

    Remember all this bitcoin/democratized finance/meme trading B.S. was born out of Silicon Valley/Social media land to takeover Wall Street. So if Wall Street made money from the fools, good for them.

  31. Island Teal says:

    SEC 🤣🤣🤣
    Gary Ginsler, aka queball, now head of the SEC was formally head of CTFC where he did nothing re the blatant manipulation of the Comex pricing.
    You will get NOTHING from the SEC.
    That’s why he was put in charge 🤡🤡🤡

    • unamused says:

      Ginsler is even worse than the last guy.

      I didn’t think that was possible. Darn my lack of imagination.

    • Depth Charge says:

      The SEC just wants their cut of the ill-gotten loot. They are no different than the mob, except the mob is probably more honest.

  32. CreditGB says:

    It is interesting how financial media speak about Capitalism being all about return on investment. That used to mean building a base of profitable sales and increasing those profitable sales to gather price support in the market.

    For a couple of decades that has been replaced by investment strategies that are as deep as one coat of water color paint.

    This has turned the market into a pile of dry tinder, ready to go up in flames. One by one, they are doing so.

    Perhaps like a forest fire, it will rejuvenate the forest into a stand of strong trees but will take a lot of destruction to accomplish.

    • unamused says:

      Good luck with that. You’re virtually certain to get more desertification.

      If I gave financial advice I would tell people to go long on oxygen futures ahead of the shortages. Take physical delivery.

      Fight off all the negatives, the worries and the doubts,
      And don’t forget to breathe.

  33. breamrod says:

    people are herd animals and FOMO is strong in them. Everyone needs to lose their shirt at least once in their life. Makes one wiser and stronger!

  34. DB Cooper says:

    “The easiest thing in the world is to run a money-losing business, where bigger losses are better. As long as investors are willing to pay for it. The hard part is bamboozling investors into paying for it.
    The genius lies in bamboozling public and corporate investors into enthusiastically and unquestioningly going along with this, and making them believe in this new religion. And that works for a while. But in the end, there is the harsh reality of business, as the dot-com crash has shown when most of these companies disappeared, and as the current generation of unicorn busts is beginning to show, and as this crisis is beginning to show.”

    Wolf Richter
    What Unicorn Money-Sinkholes Actually Disrupt
    by Wolf Richter • May 19, 2020
    They have accomplished an amazing feat: losing tons of money year after year during the Good Times in what were profitable industries.

    • unamused says:

      You could call it the Unicorn Syndrome, an expression of Mass Psychogenic Investment Disorder. It’s a distortion of the normal profit motive, of getting in on the latest business innovation, that is so severe that it excludes the business reality of having to actually earn a profit.

      Aberrations of social psychology become self-destructive business fads so easily these days.

      We’ve seen rather a lot of descriptions of symptoms here on Wolfstreet. What you need is for specialists in abnormal psychology to step in and explain it clinically. One suspects that perpetrators of these scams have already done the research and are systematically exploiting the results.

      Have you seen ‘The Basic Laws of Stupidity’ by Carlo Cipolla? Have you heard of the Mad Gasser of Mattoon? Or the Tanganyika laughter epidemic? People may seem normal just looking at them, but then you see what they do and it becomes clear that they’re more than merely eccentric.

      Never underestimate the human susceptibility to Wishful Thinking and Personal Delusion:

      ‘The mind is its own place, and in itself can make a heaven of hell, a hell of heaven.’
      – Paradise Lost

      • Dan Romig says:

        “Our imagination can dominate carceral spaces. My freedom lives beyond walls, beyond flag, beyond expectation. I’ve learned real freedom is in the mind and heart. It is there I focus my attention.”
        -Elizabeth Hawes.

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