Day trading —
Robinhood just raised another $320 million from investors.
Timothy B. Lee
– Jul 14, 2020 2:33 pm UTC
Tesla’s stock reached an unprecedented intraday high of $1,760 on Monday, just as tens of thousands of new investors were pouring into the stock using the online brokerage Robinhood. Data from Robintrack shows that the number of Robinhood users holding Tesla shares soared from 408,000 at the start of the day on Monday to 458,000 at the day’s end—a jump of 50,000 users.
By Tuesday morning, the stock had given back some of those gains, with the stock trading below $1,500.
Robinhood announced Monday that it had raised $320 million from investors at a valuation of $8.6 billion.
Robinhood stands out from other online brokerage services thanks to zero commissions and the ability to trade a fraction of a share. As a result, the platform has become popular among small-time, amateur investors—especially in recent months as people have been stuck at home due to the pandemic.
The result has been some wild swings in the prices of some stocks. In early June, for example, day traders bid up the price of Hertz shares nearly 10-fold after the company declared bankruptcy in late May. Buying stock in a bankrupt company is extremely risky because there is a high probability that the bankruptcy process will wipe out shareholders, leaving them with nothing.
Later in June, a 20-year-old Robinhood trader committed suicide, according to family, because he believed he had racked up a debt of $730,000 trading complex options on the platform—though the family says he didn’t actually owe that much. Robinhood’s founders say they were “devastated by this tragedy” and vowed to make changes to its platform, including a less confusing user interface and better screening of users who want to engage in the riskiest forms of trading.