Robintrack Newsletter (6/26/2020)
A novel way of going public and what Robinhood's recent growth says about the future.
Good evening, friends! Today is June 26, 2020. You’ll notice that we’re testing Friday evening for a change. We’re open to changing the day if we feel this would be a better digest. Otherwise, we’ll plan to keep to Mondays.
Robinhood retail traders received credibility this week as Robintrack was covered in various financial journals & publications. Robintrack’s core coder, Casey, joined the moderators during CNBC Fast Money to talk about retail trading’s glamorous gains throughout the coronavirus pandemic. As Robinhood has added an impressive 3,000,000 new users in Q1 2020, the media’s interest in Robintrack is understandable — and it’s one which we are proud to have been covering.
This week, we’re spending most of our time contextualizing the recent inflows in Robinhood holdings. Specifically, we’re looking at “popularity inflation”—what the rush of new accounts (and money) says about continued growth. In addition, we briefly touch on a novel way of 'going public.’
Contextualizing ‘popularity inflation’
The ‘popularity changes’ tab on Robintrack offers a valuable resource for gauging social interest in certain stocks. Robintrack assesses popularity by aggregate. When people are adding positions, this is represented as an increase in popularity. When people are selling the entirety of their positions, this is represented by a decrease in popularity. An important distinction in the latter is that when a stock is seeing a ‘decrease’—it means that accounts are selling their holdings in that equity entirely.
Since we started the Robintrack newsletter, we’ve specifically taken a look at how there is a disproportionate amount of ‘popularity increases.’ Unsurprisingly, retail investors are buying a lot of stock right now — and they tend to sell their entire position in said stocks less. This might contribute to why the ‘most popular stocks’ often show net increases in holdings. Last week, only 1 out of 100 stocks saw net decreases in holdings. This week, that number has jumped to 9 out of 100.
One of our colleagues pointed out another confounding element: there are a lot of people joining Robinhood right now, which is contributing to a large number of new buyers. According to estimates by CNBC, Robinhood added just one million new accounts in Q1 2019. In Q1 2020, that number for the quarter had leapfrogged to three million. The surge in new users is largely explicable by the $1,200 stimulus check, the absence of sports betting, and general boredom amidst the pandemic.
To assess the growth in the Robinhood platform, we took a sample of the top 10 stocks on Robinhood and averaged their collective holdings. Since the start of 2020, holdings in these ten stocks collectively averaged a ~136% increase. Based on both the information provided by the holdings and user counts, we’re able to make some interesting short-term conclusions (as of this writing):
The most held stock on Robinhood, Ford, has 921,672 accounts holding at least one share. This means that roughly ~7.1% of all Robinhood accounts are holding Ford.
As Robinhood added 3,000,000 new accounts in Q1 2020, holdings (at least in the top 10 stocks) more than doubled.
The top 50 stocks on Robinhood are held by at least 1.2% of all accounts as of 6/26/2020. In other words, if you wanted to be in the “50 most popular stocks” on Robinhood—just ask a little more than 1% of users to buy it.
In any given week, the most bought stock is being acquired for the first time by between ~0.2% and 0.5% of Robinhood accounts. Expectant upon Robinhood continuing to scale, it would suggest that the most popular stock to be bought or sold in a given week will be bought by between 2000 and 5000 accounts per million accounts. In other words, if Robinhood scaled to 20,000,000 accounts, we would expect that the most bought stock in any given week would be bought by ~70,000 accounts.
It is not especially clear that the sudden increase in stock popularity will stick around. It is also not especially clear if the popularity of certain equities is being driven by social demand (coverage in media, on Robinhood, etc) OR price demand (people see the price going up, so they buy). In the next few editions of the newsletter, we’ll try to dig deeper to find some insight in specific equities.
Robinhood users embrace SPACs
You might be familiar with IPOs (or “going public”), but are you familiar with SPACs? A SPAC, or special purpose acquisition company, is a company which exists for the sole intention of going public to raise funds to acquire or merge with an existing private company. They are sometimes referred to as “blank check companies” because in many cases, SPACs are founded with no pretense as to what they will invest in or become. They exist largely as an investor gamble.
Arguably, the most familiar SPAC in recent memory involves the listing of Virgin Galactic ($SPCE) on the NYSE. However, just last week, another SPAC acquisition made the mere 36 accounts come into quick money. Tortoise Acquisition ($SHLL) announced that it would merge with Hyliion, an electric truck company. After the news, it saw 27,368 accounts buy the stock (for a total of 27,407). The stock surged 140% in the days after the announcement.
This is not the first big rush of investors to SPACs. In fact, earlier this month, electric truck company Nikola ($NKLA) went public in near-identical fashion. VectoIQ Acquisition, another SPAC, announced it would re-list as Nikola on the NASDAQ.
SPACs have surely attracted the interest of Robinhood traders. Nikola and Virgin Galactic have skyrocketed to become the 53rd and 54th most-owned stock on Robinhood—a telling indicator of the effects of SPACs.
That’s a wrap for this week! If you enjoyed the content of this newsletter, we’d greatly appreciate if you share it or subscribe ($5/mo or $50/yr) to help support Robintrack. Supporting Robintrack might also make it possible to produce a daily newsletter, a podcast version of the newsletter, etc.
In the meantime, best of luck this week. Take care — see you soon!
The Robintrack newsletter is a weekly digest produced for informational purposes only. It is not intended to serve as investment advice. The digest is produced with the intent to provide a data-centric analysis of how digital communities, millennials, and Gen Zers are trading stocks. Robintrack is not affiliated with Robinhood in any way, but all popularity data is sourced from Robinhood directly via a public API.