Robinhood Markets missed on earnings and revenue for the fourth quarter, it reported late Wednesday. HOOD stock pared gains Thursday after the online broker said it intends to repurchase the shares that Sam Bankman-Fried bought last year.
The board of directors authorized Robinhood to pursue purchasing "most or all of the 55 million remaining Robinhood shares" that Bankman-Fried bought in May 2022 through Emergent Fidelity Technologies, the company said.
"We think this repurchase will be accretive over time and removes a distraction for shareholders," Robinhood CEO Vlad Tenev said during an earnings call Wednesday.
In May, now-defunct crypto exchange FTX's Bankman-Fried disclosed that he had purchased a 7.6% stake in Robinhood, through Emergent Fidelity Technologies.
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In November, FTX filed for Chapter 11 bankruptcy protection. And Bankman-Fried resigned amid fraud charges, with 1 million creditors left in their wake.
In addition, Robinhood co-founders Vlad Tenev and Baiju Bhatt said they will cancel nearly $500 million of their share-based compensation.
This lowers operating costs and share count, the Robinhood earnings release said, while resulting in a one-time accounting charge of roughly $485 million.
Also on the earnings call, Robinhood management revealed the company accidentally sold short on a small stock, Cosmos Health as it went on a wild ride in December. That cost the trading app $57 million — more than COSM stock's current market capitalization.
Tenev noted "a processing error on a corporate action" that was "really disappointing." Chief Financial Officer Jason Warnick elaborated: "A processing error caused us to sell shares short into the market, and although it was detected quickly, it resulted in a loss of $57 million as we bought back these shares against a rising stock price."
HOOD Stock
Shares reversed 3.2% lower Thursday, testing the 21-day moving average, after rising 6.6% to 11.16 earlier in the session. HOOD stock edged down 0.8% at 10.47 on Wednesday.
Robinhood stock is just below a 12.86 cup-shape buy point in a bottoming base, according to MarketSmith chart analysis.
COSM stock fell nearly 4% Thursday.
Robinhood Earnings Worse Than Feared
Late Wednesday, Robinhood reported a loss of 19 cents per share on revenue of $380 million. Year over year, the online broker narrowed losses by 30 cents while revenue grew 5%, snapping three straight quarters of declines.
Analysts were expecting Robinhood to lose 15 cents per share on sales of $396.1 million, FactSet shows.
The retail stock trading app also said that monthly active users fell for at least the fourth straight quarter. But average revenue per user rose for the first time in at least four quarters.
"Looking back over the past year, I'm incredibly proud of the tremendous execution of our team on our 2022 product road map. We're now starting to see meaningful traction on a number of the products we launched, which gives us confidence they can grow into significant business lines over time," said CEO and co-founder Vlad Tenevs said in Wednesday's Robinhood earnings release.
Among new products, Robinhood launched IRA retirement accounts last December. In January, the zero-fee trading app reported more than 1 million people on the IRA waitlist, including gig economy workers.
