Robinhood's Stock Now Valued Below Its Cash On Hand

Friday marked a new low for shares of Robinhood Markets, resulting in a market value that is less than the brokerage's cash on hand.

Robinhood's cash and cash equivalents were $6.19 billion at the end of the first quarter.

After incurring more than $3 billion in losses since its initial public offering (IPO) in late July this year, Robinhood's shares have fallen more than 80%, reducing its market valuation to as little as $5.98 billion.

At least two Wall Street market strategists dropped their price expectations on the company this week after Robinhood posted poor May metrics, indicating a larger slump in trade and turbulence in cryptocurrency markets as monthly active users declined by nearly 40% year-over-year.

In addition, the company is now selling at approximately 85% of its book value, down from almost 500% at the end of September.

John Heagerty, an analyst at Atlantic Equities, stated in a letter to clients that with customers returning to pre-pandemic behavior patterns and a probable recession on the horizon, "user engagement is expected to decrease further."

Heagerty stated that falling cryptocurrency valuations will have a direct effect on both order volume and order value.

Heagerty cut Robinhood to the equivalent of sell and reduced his price target to $5 per share, a day after JPMorgan Chase & Co's Ken Worthington reduced his to $7 from $11.

The stock fell 2.2% to $7.07 at 1:53 p.m. in New York, after earlier reaching a record low of $6.87.

Rich Repetto, an analyst with Piper Sandler & Co who has a neutral rating on the Robinhood stock, said in a phone interview, "A lot of guys who made accounts in response to Reddit recommendations have left."

Meanwhile, the founders of Robinhood, chief executive officer Vlad Tenev and chief creative officer Baiju Bhatt, are no longer among the world's billionaires as a result of the decline.

It has also diminished the riches of crypto billionaire Sam Bankman-Fried, who recently acquired 7.6% of the outstanding shares of Robinhood. 

Bankman-Fried's share is now valued at approximately $400 million, which is roughly 40% less than when the first transaction was reported in May.

Last year, throngs of individual investors teamed together on Reddit to purchase GameStop and other stocks through Robinhood.

The move compelled Robinhood to restrict certain trades and increase funds to mitigate future volatility. The company's leaders have remarked on its solid liquidity and credit lines.