Tech Stock Goes Too High Too Fast, Triggers Market Shutdown

Robinhood shares ended 50% higher yesterday after two sessions of huge spikes. Now, this week, the investment app’s stock has gone up by 100%, causing it to be a new hot “meme” stock.

Shares were stopped for volatility in the first moments of trading on Wednesday. The stock increased over 80% at one time. The upward movement comes one day after the stock boosted up 24%. The stock price went past its IPO value of $38 on Tuesday in contrast to its debut just last week.

Retail interest might be a factor for the upward drive. Robinhood is among the most talked about stocks on Reddit’s WallStreetBets. The stock’s discussion volume has gone up over the past two days.

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This Wednesday, Fidelity’s real time data showed Robinhood was a top moved stock, behind AMD and AMC, two stocks closely watched by WSB members.

While short squeezes usually have driven up “meme” stocks, Robinhood’s movement is not driven due to a short covering. “While there are some short side activities in the stock, it is the longer side which is the top driver of this volatility,” Ihor Dusaniwsky from S3 Partners has said.

“The upward pressure is not a short squeeze for the simple fact that there was not enough time for a big short to be built,” he said.

High profile investments into Robinhood might also be pushing the price higher. Last week Cathie Wood’s ARKK ETF bought up around 4.9 million shares of Robinhood, as reported by Bloomberg.

Investors are watching the stock closely after its recent public debut.

The stock decreased by 12% under its IPO price during its initial day of trading on the Nasdaq. Shares ended lower by 8%. Some investors questioned whether its performance was connected to Robinhood’s hybrid auction-style IPO, a lack of lock-up time for 15% of shares owned by employees, or worries over regulatory headwinds.

Robinhood is a vital player in the retail trading trend involving GameStop and other stocks over the previous one year or so. In a weird move, the company offered around 35% of its shares to retail investors during its IPO.