This post was originally published on this site
After Robinhood’s share price surged on Wednesday, the company announced Thursday that it filed to sell up to 97.9 million more Class A shares over time.
The no-fee trading app popular with young, new retail investors registered the investor-held shares in a Securities and Exchange Commission filing. This makes them eligible for sale.
“The timing and amount of any sale are within the sole discretion of the selling stockholders,” Robinhood
HOOD,
said in the filing.
The sales will be made by selling shareholders upon the conversion of certain convertible bonds held in connection with the IPO. The bonds were issued in a prior private placement conducted ahead of the IPO.
“This is not a surprise,” Ryan Sterling, founder of Future You Wealth, a financial advisory firm, said of the filing.
But should the potential for more shares on the market change the buy-sell calculus of retail investors who might want to jump on the Robinhood train?
Not in Sterling’s mind, at least.
Anyone who decides they like the company’s fundamentals should just, buy, hold and hunker down for volatility that could come from any downward price pressure from investors selling, and also from the “Robinhood skeptics,” he said.
“
‘Your risk tolerance and financial goals should be the ultimate guiding factors in your investment decisions.’
”
“I think we will see a war over the next couple months between Robinhood enthusiasts and Robinhood skeptics,” Sterling said.
Indeed, some analysts say the stock has plenty room to grow in any battle.
The brokerage platform said in its Thursday filing that it would not receive the proceeds of any transactions, and the company declined to comment beyond the filing.
On Wednesday, the company’s stock price ended at $70.39, up 50%. By Thursday afternoon, the stock had lost some of the ground it gained the previous day.
It’s a sharp upwards swing after a lackluster debut in the public trading markets last week, opening on its IPO date at $38 and ending the day at $34.82.
Like Sterling, Stanley Himeno-Okamoto, founder of DRS Financial Partners, says share price volatility is to be expected right now. But ultimately, more shares available and floating in the market can contribute to more price stability.
Still, any additional shares coming into the market doesn’t change the risk/reward calculus in his view because the some company-specific fundamentals still apply, Himeno-Okamoto noted.
“At the end of the day, this news shouldn’t be the piece of information that convinces you to invest or not,” he said. “Your risk tolerance and financial goals should be the ultimate guiding factors in your investment decisions.”
