Robinhood Inc., the popular trading platform, recently reported a loss of $57 million due to a processing error in a small company’s stock in December.
The mistake occurred when Robinhood mishandled a 1-for-25 reverse stock split by Cosmo Health, a nutraceutical company with a market capitalization of about $50 million.
Robinhood Inc leaks profit losses
Due to this error, Robinhood shareholders were able to trade shares they did not own, causing the company to hold a temporary short position in the shares. When Robinhood tried to cover the short, the stock soared, resulting in a loss.
On the day of the error, the shares opened at $3.85 and rose as high as $23.84.
“We handle a large number of corporate actions each quarter, but this instance was a rare circumstance that we missed. We are paying the utmost attention to it and treating it with the seriousness it deserves.”
Vlad TenevaCEO of Robinhood Markets.
Robinhood’s board of directors recently approved plans to purchase 55 million shares initially purchased by Emergent Fidelity Technologies.
The company apparently has ties to Sam Bankman-Fried, former CEO and co-founder of now-bankrupt cryptocurrency exchange FTX. The company suffered a severe blow due to a processing error on December 16. This prompted CEO Vlad Tenev to cancel the 2022 bonuses for top executives.
Robinhood shares rise after acquisition and cost-cutting measures
Robin Hood experienced an increase of 5.6% in its share price in pre-market trading on February 9, reaching just over $11.
The share price increase came after the company announced that it would buy a portion of the shares of Sam Bankman-Fried, the founder of FTX. This move is a positive move by the market, which probably fueled the rise in the share price.
Robinhood leaders also announced they would not accept $500 million in stock-based wages, another move aimed at cutting costs. This decision is also considered a positive step, as it demonstrates that the company’s leaders are committed to improving the financial health of the company.
Despite Robinhood’s struggles in the past, its shares have performed well, up 29% this year. This is higher than the 14% rise in the Nasdaq Composite, a broader stock index. The recent positive news and the performance of the company’s shares show that it is making progress and that investors are responding positively.
