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Robinhood shares plummet as it warns crypto-fuelled revenue surge is short lived

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An electronic screen at Nasdaq displays Robinhood in New York's Times Square following the company's IPO last month
An electronic screen at Nasdaq displays Robinhood in New York's Times Square following the company's IPO last month. Photo: AP Photo/Mark Lennihan

Trading platform Robinhood's (HOOD) stock careened about 12% lower in pre-market trading after it warned investors the night before that its bumper Q2 results may be short lived. 

The day trading app has been riding a wave of retail investors piling into stocks and the cryptocurrency market. The boom had led to a more than doubling of revenue to $565m (£413m). Revenue is up 131% year on year. 

Much of that is owing to crypto traders buying and selling dogecoin (DOGE-USD) – a meme-inspired token that was originally launched as a joke. 

More than half of its total transaction-based revenue came from crypto trading. Crypto transaction-based revenue for the second quarter was $233m, compared with just $5m for the same quarter in 2020.

More than 60% of Robinhood accounts traded cryptocurrencies in the second quarter.

Shares were trading at $43.65 at 10.30am in London pre-market. The company has seen its shares gain more than 30% since its IPO at the end of July. 

"For the three months ended Sept 30, 2021, we expect seasonal headwinds and lower trading activity across the industry to result in lower revenues and considerably fewer funded accounts than in the prior quarter” read the company quarterly report.

Read more: World markets head lower as Federal Reserve taper fears realised

On August 5 the stock had tanked 27% after the company announced some stockholders would be cashing out up to 97.8m shares. Robinhood later clarified that those sales were on hold until receiving SEC approval.

In line with the company's "democratize finance for all" theme, the trading platform allowed shareholders to submit questions ahead of the Q2 earnings call. Those with the most "upvotes" were answered by management.

Watch: What are the risks of investing in cryptocurrency?

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