"Robin Hood" into a new battlefield for retail investors to force air agencies? Major shareholders sold, and institutions firmly sang short

At the beginning of this year, the century war of "retail investors holding group stocks" such as "retail investors holding group stocks" such as "gameStop" and "AMC" in the United States forced to short hedge funds is still fresh in people's memories.

Interestingly, after a few months, Robinhood, the American retail investor base and zero-commission online broker that fueled the war, seems to have become a new battlefield between retail investors and institutions after its listing.

After the break on the first day of the listing, Robin Hood's stock price was pushed to a new post-IPO high by retail investors on Tuesday and Wednesday, but plummeted on Thursday as major shareholders applied to sell nearly 100 million shares. Many institutional investors also insist on being bearish on the stock.

Retail investors "charge" again, and institutions sell again

Robin Hood shares surged more than 20 percent on Tuesday and surged 81 percent to $85 on Wednesday, triggering circuit breakers several times during the session before closing above $70, setting a new high.

But the good times did not last long, on the 5th, Robin Hood submitted to the U.S. Securities and Exchange Commission (SEC) documents showed that the early major shareholders involved in the sale of its convertible bonds in February this year applied for the sale of nearly 97.9 million shares of the company's Class A common stock, and the relevant proceeds will all go to the shareholders of the selling shares.

In February, Robin Hood faced a potential massive margin call due to the surge in "retail holdings" and had to sell $3.55 billion of convertible bonds to raise funds, the documents said. The first investors to buy convertible bonds are allowed to freely sell 50 percent of their holdings, while the remaining 50 percent will be lifted on August 25, three weeks later.

The above negative news caused Robin Hood to plunge nearly $20 per share on Thursday, and finally closed at $50.97, down nearly 27.6%, basically giving back all of its gains since Tuesday.

Data compiled by Vanda Securities Pte. showed retail investors net buying $19.4 million worth of Robin Hood stock on Tuesday, making it the sixth-largest stock traded on the trading platform. In the first three hours of normal trading hours on Wednesday, more than 100 million shares changed hands, five times the average turnover rate in recent days.

According to Swaggy Stocks, the stock was listed as the hottest stock on Reddit's WallStreetBets forum. In online transaction chat rooms such as StockTwits, there has also been a surge in discussions about Robin Hood, and Twitter subscriptions related to Robin Hood have also exploded. Some users on these platforms are starting to compare this situation with the situation at game stations and AMC theaters earlier this year.

On Wednesday, Robin Hood also became the most traded stock on fidelity's trading platform, winning more than 32,000 customer buy orders, about twice the number of buy orders for AMC Cinema, the second-largest stock traded on the platform.

Some traders noted that Robin Hood's stock price surge earlier this week was driven in part by calls to his stock, the most active of which was the $70 call that expired on Aug. 20. According to the rules, a listed company cannot trade stock options until at least three days after an IPO, and options trading usually increases stock price volatility.

Matt Maley, chief market strategist at Miller Tabak & Co., said retail investors like to use options, and most of Robin Hood's options trades are likely to be retail. "When retail investors buy a call option, traders have to hedge by buying stocks. So when retail investors buy a lot of call options on Robin Hood, for a period of time, the call options can boost the stock price, making this call self-fulfilling. He said

Institutional analysts insist on "singing short"

In addition to the major shareholders, institutional analysts are once again on the opposite side of retail investors, as they were at the beginning of the year.

Ed Moya, senior market analyst at Oanda Corp., said: "We've seen similar situations before, where Robin Hood's jump up and down will not end well for many traders. Once the government regulates payment for Order Flow, Robin Hood's source of income will be questioned. ”

Order flow payment refers to the return or compensation that a broker receives by forwarding orders received from a client to a high-frequency trading market maker for execution. While this type of payment is very small, forwarding a large number of orders to a third party for processing can be very profitable.

In fact, after the retail vs. Wall Street incident at the beginning of this year, order flow payments as "bundled" brokers and high-frequency trading market makers entered the regulator's field of vision. At the time, Sen. Elizabeth Warren, a Democrat, said she had "disturbing concerns" about companies executing Robin Hood's orders, that market makers had forced Robin Hood to restrict trading in certain stocks during previous unrest, and that "the public has the right to have a clear picture of Robin Hood's relationships with large financial firms and to what extent those relationships could undermine their obligations to their clients."

Julie Chariell, senior fintech industry analyst at BI, also said: "The surge in Robin Hood's stock price has not changed our perception of its fundamental instability. In addition, Robin Hood's order flow payment revenue fell 34% in the second quarter of this year, exacerbating our concerns about its order flow payment revenue by 2022. In addition, the surge in retail trading volume on crypto assets on their platforms in the second quarter is unlikely to repeat in the third quarter. These factors add up so that our analysis still predicts that its baseline estimate should be around $30. ”

David Trainer, an analyst at market research firm New Constructs, believes that Robin Hood's market capitalization should not exceed $9 billion, that is, the stock price should fall more than 75% from its current level.

However, although on the surface it seems to be a dispute between retail investors and institutions, similar to the retail war on Wall Street at the beginning of the year, behind the soaring stock price of Robin Hood, it is actually inseparable from the competition between some investment institutions and other investment institutions.

According to trading statistics, ARK Invest, a subsidiary of Cathie Wood, known as the female version of Buffett, bought more than $65 million of Robin Hood stock in a single trading day on Monday (2nd).

Meanwhile, ARK Invest has three ETFs holding Robin Hood, with a total holding of more than 6.46 million shares as of Monday.

"Retail holding stocks" have recently been collectively sold off

In fact, not only Robin Hood, but also "retail investors hugging group stocks" have been bearish recently, and the trend is not satisfactory.

Due to the fading tide of risk sentiment and the decline in retail preferences, these "net red stocks" that once broke countless records are now being sold off harshly and ruthlessly by Wall Street. In the most recent month ended Aug. 4, AMC Theaters has fallen 35.35 percent, down 13.65 percent in the past week, and Game Inn has also fallen about 25 percent in the past month and down 9.68 percent over the past week. The situation for other "retail concept stocks" is also not optimistic, with Clover Health Investments Corp down more than 30% in the same period and BlackBerry down 15.18%.

Amanda Agati, chief investment strategist at PNC Financial, said this week that when the U.S. government begins to undo the pandemic-related stimulus, U.S. retail investors may be hesitant to put new money into the market and the retail investment boom may fade.

"The fiscal cliff is about to emerge, which we judge will be around September. [Since) extended unemployment benefits will expire, I think the fanatical retail trading activity will start to fade. She believes that this may prompt a 5% to 10% correction in the high-valued market.

Previously, in order to alleviate the economic damage caused by the NEW crown pneumonia epidemic, the United States approved a series of relief measures in March 2020, and then the US Congress and the US government repeatedly extended the relief measures. According to foreign media reports, the additional unemployment benefit benefits will end on the first weekend of September this year.

A recent Survey of 430 U.S. retail investors by Deutsche Bank showed that, on average, retail investors plan to invest 37 percent of their benefits directly in stocks.

In an interview with the media earlier last month, Well-known hedge fund manager Michael Burry warned: "Retail concept stocks will collapse like the previous dot-com bubble and subprime mortgage crisis." ”

Having said that, this year's retail investment fever and the emergence of "retail group stocks" have also made Wall Street investment institutions pay more and more attention to retail investors.

A recent Bank of America survey showed that about 25 percent of institutions are already tracking investor sentiment on social media, and about 40 percent have expressed interest in doing the same in the future.