Here’s why Robinhood shares tanked about 10% in extended trading

Robinhood Markets Inc. (NASDAQ: HOOD) reported upbeat results for its fiscal second quarter on Wednesday as interest in cryptocurrencies remained strong.

Shares of the company, however, tanked about 10% in after-hours trading as the management warned that it wouldn’t be able to replicate the same performance in the current quarter on lower trading activity and seasonal headwinds.

Second-quarter financial performance

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Robinhood swung to $502 million of net loss in the second quarter that translates to $2.16 per share on $528 million of costs related to the fair value of convertible notes and warrant liability. In the same quarter last year, it had posted $58 million of profit or 9 cents per share.

The financial services company generated $565 million in revenue versus the year-ago figure of $244 million. This annualised growth of more than 100% was attributed to cryptocurrency transactions valued at $233 million – an increase from $5 million last year, as per the earnings press release.

In its SEC filing last month, Robinhood had forecast up to $537 million of net loss and $546 million to $574 million in total revenue. Other notable figures include 21.3 million MAUs, 22.5 million net cumulative funded accounts, and assets worth $102 billion under custody compared to $33.4 billion in Q2 of the previous year.

Rashaun Williams’ remarks on CNBC’s “Closing Bell”

Robinhood’s revenue from equity transactions tanked 26% in the recent quarter, but Rashaun Williams from Manhattan Venture Partners shrugged it off, saying Robinhood wasn’t a one-trick pony. On CNBC’s “Closing Bell”, he said:

“If you set up a business that derives all its money from equity transactions, then you’re going to see a very dismal future in your stock performance. But when you grab this amount of young, new investors, and get them excited about a movement (democratisation of investing), then you can sell them other things. It’s kind of like the Amazon model, they got you for books, and now you’re doing everything on Amazon.”

The earnings report comes a week after Robinhood said it will buy Say Technologies for $140 million in cash.