Recent IPO Robinhood (HOOD) Is Now a Meme Stock

Robinhood has gone meta.  After stumbling weakly through its IPO last week, the controversial trading app, which has been at the center of the COVID era’s stimmy- and meme-fueled explosion of retail investing, has surged over the past couple days…

its price gyrating wildly in the fashion of stonks such as Gamestop and AMC Theatres. It surged as much as 81 percent on Wednesday and at one point had to be halted for volatility before falling back down a bit. It has still just about doubled in price over this week.

The company’s stock seems to have started rising in part because Ark Investment Management founder Cathie Wood, who’s sort of become the high priestess of the weird-finance era, started buying up more shares in the company. But retail investors—which is to say Robinhood’s core users—are driving some of the action too. Naturally, there are jokes about it all over Reddit’s wallstreetbets forum (not all of them positive, but we’ll get to that in a minute). Anyway, the meme-stock merchant has now become the meme stock.

This was a little predictable, in the sense that some people were in fact predicting it (Vox, for instance, ran an IPO-day piece titled “Is Robinhood the Next Meme Stock.”) The company also helped engineer this situation by reserving 20 to 35 percent of its shares for its own users, an unusual choice that probably turned off some institutional investors, but guaranteed that its own somewhat eccentric band of diehards would have a lot of sway over its performance.

And, you know, it seems like there’s some self-aware logic to that move. Robinhood is not exactly universally beloved by day traders, many of whom are still wildly pissed off about how it had to freeze transactions on Gamestop in the middle of that company’s wild ride, essentially because the brokerage didn’t have enough cash on hand to keep the gears rolling in its settlement process as the number of transactions surged. (The title of a typical r/wallstreetbets post today: “It absolutely blows my mind that so many people and especially people on this sub are STILL using Robinhood despite what happened with the whole gamestop fiasco.“) But right now, Robinhood still has a pretty devoted fanbase, much of which abides by the code of diamond hands, taking samurai-like pride in buying and holding no matter what the market throws at them. As Matt Levine points out at Bloomberg, Robinhood has essentially built the diamond-hands ethos into its IPO:

 If they bought stock through Robinhood’s IPO Access platform, they are discouraged from selling for 30 days: If they do, Robinhood will ban them from participating in future IPOs for 60 days. Robinhood has its own diamond-hands policy for its customers who bought in the IPO, and 25% of the shares in the IPO went to them. So a lot of stock is subject to this sort of soft, non-binding lockup; retail investors who like the stock can buy, but retail investors who own the stock and think it’s overpriced might hesitate to sell. And Robinhood sold its stock to 300,000 customers; that’s a lot of people with diamond-hands-by-default.

But you can also take the idea a step further: The 300,000 or so customers who now own a…

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