Robinhood Markets experienced a notable surge in its stock value Wednesday after the fintech company unveiled a new credit card, marking a strategic move to diversify its offerings and lessen its dependency on revenues influenced by trading activities. Shares of the Menlo Park, California-based enterprise climbed by 4% during afternoon trades, reaching a peak not observed since December 2021.
Targeting its Gold tier clientele, Robinhood introduced a credit card devoid of annual or foreign transaction fees, featuring a 3% cashback reward in points on purchases. Michael Ashley Schulman, CIO, and partner at Running Point Capital Advisors, highlighted the potential revenue growth from linking the credit card to Robinhood’s premium services, emphasizing the lucrative aspects of options trading and margin usage among Gold members.
Robinhood gained prominence during the 2021 surge in retail trading, attracting individual investors to its no-commission platform. These users heavily invested in various stocks, particularly during the pandemic lockdowns, contributing to the heightened trading activity.
Earlier this year, Robinhood disclosed its intent to enhance margins and pursue ‘profitable growth,’ a revelation that came alongside an unexpected quarterly profit announcement. The firm has since enjoyed a boost from heightened retail trading in both capital and cryptocurrency markets.
The reinvigorated trading dynamics and a renewed commitment to profitability have spurred over a 50% increase in Robinhood’s stock value year-to-date. According to Schulman, Robinhood is strategically enhancing its appeal to customers, fostering engagement, and attracting seasoned investors.
Current short interest in Robinhood’s stock stands at 5.88% of its free float, resulting in substantial paper losses exceeding $200 million for short-sellers since the onset of 2024, based on Ortex data.
