Is Robinhood (HOOD) a Meme Stock?

Robinhood (HOOD) is tearing the #memestock and #wallstreetbets worlds apart.

People can’t seem to decide whether Robinhood is a real memestock. This is what our Twitter poll said:

Now let’s get something straight: we don’t have to LOVE every meme stock. We’re simply identifying them. So…

Robinhood’s widely followed IPO underwhelmed. The stock opened on July 29, 2021 at $38 per share, at the low end of expectations.

In the days to follow Robinhood’s stock fell 8.4%, leaving many to wonder was Robinhood a flop?

And on August 4, the stock hit $85. Seriously, look at this chart.

That sure made Ark Investment’s Cathie Wood look smart. On August 2, when the stock was below $40, she purchased 1.3 million additional shares of Robinhood.

In Reddit’s Wallstreetbets this morning, Robinhood was among the most discussed stocks, fueling today’s surge. 

There’s a great divide on whether Robinhood should be considered a meme stock due to meme investors’ emotions. Robinhood initially planned for up to 35% of its shares to be reserved for users on its own platform, but the company ended up only reserving 20%. This angered many meme investors that are also Robinhood users, as they wanted the company to put them first. 

Another major reason for pushback is Robinhood’s controversial limit on the number of AMC and Gamestop shares that could be purchased during the January 2021 meme stock craze.

Many meme investors are still holding a grudge, and wanted to get back at Robinhood by not investing in the company and not acknowledging it as a meme stock. Who knew memes could become political? 

The most liked comment in the Wallstreetbets subReddit when Robinhood IPO’d was “Don’t buy. Don’t sell. Watch em burn. 🔥🔥🔥”

But, we have to be fair. Robinhood meets all the requirements for meme stock status. The company is trending on social media, there will most likely be shorts given the drastic surge, the company has a major cultural impact, and the stock is acting crazy.

And like AMC and GameStop, Robinhood’s options are outrageously priced.

Implied volatility is a measure of how expensive an option is.

On August 4, Robinhood closed at $71. The August 20 $70 calls closed at $12.50 with an implied volatility of 234%.

Here are the implied volatility readings on at-the-money August 20 calls on other notable momentum names and meme stocks:

Tesla (TSLA): 44%
Apple (AAPL): 20%
Moderna (MRNA): 82%
GameStop (GME): 101%
AMC (AMC): 173%

So Robinhood is expected to be many times more volatile than most major tech stocks, and even more so than the ever-wild AMC and GameStop.

While many meme investors may not be happy that Robinhood has become a meme stock, it meets all the requirements and is now included in our meme stock universe.