Back in October, the Securities and Exchange Commission found nothing amiss in the way l’affaire GameStop played out, at least technically speaking. And U.S. District Judge Cecilia Altonaga, reviewing the various lawsuits against brokerage app Robinhood Markets, could not agree more.
“No doubt, plaintiffs were gravely disappointed when Robinhood suspended purchases of the meme stocks and their holdings declined in value,” Judge Altonaga wrote. “But the law does not afford relief to every unfulfilled expectation….” In November, Judge Altonaga dismissed a related lawsuit in which investors accused Robinhood of colluding with electronic trading firm Citadel Securities to stop buying in meme stocks…. Robinhood welcomed the new court ruling. “Once more, this confirms that the unfounded allegations against Robinhood have no basis,” the company said in a written statement.
Not that the news is all good for the not-so-merry men.
Commission-free brokerage Robinhood Markets Inc on Thursday posted a $423 million net loss in the latest quarter, and its shares tumbled as much as 15% in after-hours trade even as revenue edged past analysts' estimates…. Shares of Robinhood sank as much as 15% to $9.98 in extended trading following results. The share price at its IPO in July last year was $38, and its record high in August was $85….
Transaction-based revenue from cryptocurrencies jumped 304% to $48 million in the fourth quarter, while revenue from equity trading declined 35% to $52 million.
Hmm. Not sure how well the former’s gonna hold up during the crypto winter, especially given that
[I]ts monthly active users declined 8% from the previous quarter to 17.3 million as retail investors pulled back from the market.
Still, [CFO Jason] Warnick said that "there is nothing to suggest our customers are disengaging."
Really, ‘cause a sizeable drop in active users sure looks an awful lot like customers disengaging. But then again, we’re talking about a company that sees a threat to more than $7 of every $10 it takes in as NBD.
Robinhood derived approximately 72% of its revenue from PFOF and other transaction rebates in the fourth quarter of 2021.
It has said it does not expect the SEC to ban the practice, but expressed confidence it could find other ways to generate revenue, possibly executing client orders internally.
Of course, if that’s not enough Schadenfreude for those who believe they were robbed by the nefarious machinations of Vlad Tenev and Ken Griffin, they can also enjoy the continued travails of Gabe Plotkin.
As of the beginning of last February, Melvin had to post a 120% return to do [recoup its meme frenzy losses]…. From February through December, Melvin notched a 33.2% return, soundly beating most other such funds. But because losses that January shrank so sharply the pool of money it was investing, the gains during the rest of the year didn’t bring the firm close to making up the earlier losses.
What’s more, it seems like January just isn’t Gabe’s month.
Melvin lost about 17% in the first three weeks of the year….
An improvement, to be sure, but still, if only he knew how to read tweets like Senvest Management founder Richard Mashaal.
“[Elon Musk’s] piling on with that tweet for us was … we all looked at each other, and thought how do you top that?” Richard Mashaal, Senvest Management’s founder, CEO and co-CIO, said in an interview. “And so for that, for us, that signified peak momentum and we proceeded to exit the rest of our position.”
The Tesla CEO tweeted “Gamestonk!!” on Jan. 26, 2021, after the bell. The next day, GameStop reached its closing top of $347.51 apiece, when Senvest dumped its bet.
Robinhood Meme-Stock Negligence Suit Is Rejected by Judge [WSJ]
Robinhood posts $423 million net loss, shares sink after hours [CNN Business]
Hedge Fund Melvin Lost $6.8 Billion in a Month. Winning It Back Is Taking a Lot Longer. [WSJ]
The fund that made $700 million on GameStop knew it was time to sell after an Elon Musk tweet [CNBC]
For more of the latest in litigation, regulation, deals and financial services trends, sign up for Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.