Robinhood Market Inc slides on cautious update and Dogecoin dependence

Shares in memestock favourite () slumped more than 9% overnight as it flagged rising costs with a warning that trading activity is slowing.

The controversial app developer floated at the end of July on a wave of frenzied dealing in so-called memestocks such as AMC and Gamestop and cryptocurrency trading.

Results for its second quarter showed that the crypto surge had helped fuel a 131% jump in revenues to US$565mln in the three months to June 2021, or near the top of the company’s estimates.

Crypto trading accounted for US$233mln or more than half of the total, up from 17% in the first quarter, as 60% of active account holders dabbled with digital currencies during the period.

Robinhood offers trading in seven types of digital currency, including Dogecoin, which accounted for around a third of its crypto trading.

Concern over whether this interest in Dogecoin will continue was a contributor to the company’s cautious forecast for the current quarter.

Robinhood stated it expected “seasonal headwinds and lower activity” to lead to less trading and fewer new funded account in the three months to September.

In particular, it said if demand for Dogecoin declines and is not replaced by trading in another crypto, revenue would be affected.

Rising losses also unnerved investors, with a net deficit of US$502mln or US$2.16 per share though this was in the middle of forecasts.

The mood was already jittery after the company revealed last week that existing shareholders intended to sell 98mln shares following the rally in the share price since the initial slump when trading began on Nasdaq.

That potential sale is being reviewed by US regulator the SEC.

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