Huge percentage gains – “Robinhood skyrockets 25%”, “Coinbase skyrockets 35%”. But you can barely see it on the stairs to Heck
This is now a common occurrence with these imploded stocks.
By Wolf Richter for WOLF STREET.
Headlines were everywhere last night and today: “Robinhood Soars…” or Robinhood Stock Soars…” because it soared, currently about 25% from last night’s close, on news that ‘crypto billionaire’, namely Sam Bankman-Fried, the founder and CEO of crypto exchange FTX, bought 56.3 million shares of Robinhood [HOOD] for a 7.6% stake for about $648.3 million, according to Robinhood’s 13D filing with the SEC last night.
He bought those shares during the sale, paying an average of $11.52 per share. When the filing came out, it was seen by the market – regardless of the algo or who is trading HOOD – as a nod of approval from a “crypto billionaire.”
It’s good and dandy. But the headlines gave the impression that Robinhood had rebounded in a big way, when in fact that 25% came from a very low stock price and represented a very small amount of real dollars. At the current price of $10.68, that 25% bounce equates to $2.12 for a company that once traded at $85.00 and is still down 87% from last August’s high. . And this huge price spike is just another minor step on the uneven stairway to hell (data via YCharts).
But here’s the problem with the “planes” from very low levels: when a stock plunges 90%, from $100 to $10, then surges 25%, it only returns to 12 $.50, maybe where it was a day or two ago, and still down 87.5%, down from 90%. To get back to $100, the stock would need to “skyrocket” 900%.
This stuff now happens constantly to imploded stocks. Some news comes out, or no news comes out, or an analyst who had been buzzing about the stock during the implosion comes out with a piece of how everyone is wrong, and the stock that was crushed suddenly spikes by a huge percentage, like 25% or 30% or even 50%. But when you look at a one-year chart, you can barely see this “spike” which is just another small step on the uneven stairway to hell.
This also happened to a bunch of other imploded stocks today, including Coinbase [COIN]when an Oppenheimer analyst, who had been touting Coinbase all along, came out and said everyone was wrong after the company’s shares fell further, following its disastrous earnings and outlook, a 10-Q disclosure of its account holders being “unsecured creditors” in a bankruptcy filing, and a subsequent tweet storm from its CEO who informed exhausted account holders that “we have no risk of bankruptcy…”
So the Oppenheimer analyst who put Coinbase all the way with an “outperform” rating and a price target of $197 then came out yesterday saying that the new language in the 10-Q filing and CEO tweets are “grossly misunderstood and taken out of context. And WHOOSH is pushing the stock up as a percentage, from Wednesday’s closing price of $53.72, up 36%, to $71.65 currently, but on the chart since its IPO in April of this year. last, it was just another small step on the uneven stairway to hell (data via YCharts):
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