Robinhood has disclosed a loss of $57 million as a result of a processing error involving shares of a small company in December.
The error was made when Robinhood handled Cosmo Health’s 1-for-25 reverse stock split improperly. Cosmo Health is a nutraceuticals company with a market value of about $50 million.
This mistake allowed Robinhood’s shareholders to trade shares that they did not own, allowing the business to temporarily short the stock. The shares soared as Robinhood tried to cover the short, causing a loss. Shares started the day of the error at $3.85 and eventually reached a high of $23.84.
Vlad Tenev, CEO of Robinhood markets said:
“We handle a vast number of corporate actions each quarter, but this instance was an exceptional circumstance that slipped past us. We are giving it the utmost attention and treating it with the gravity it deserves.”
The board of directors of Robinhood recently approved plans to buy 55 million shares that Emergent Fidelity Technologies had first purchased. Sam Bankman-Fried, the former CEO and co-founder of the now-defunct cryptocurrency exchange FTX, is reportedly connected to the company.
The organization was dealt a serious blow on December 16th as a result of a processing mistake. The CEO, Vlad Tenev, decided to cancel the executive compensation for 2022 as a result.
In pre-market trading on February 9, Robinhood’s stock price rose 5.6%, closing at just over $11.Following the company’s announcement that it would purchase some of Sam Bankman-shares, Fried’s the founder of FTX, the stock price increased.
This action by the market was constructive and probably contributed to the rise in stock price. The decision not to accept $500 million in stock-based compensation was another cost-cutting measure made by Robinhood’s founders.
This choice is also seen favorably because it demonstrates the company’s leaders’ dedication to enhancing the organization’s financial stability. Even though Robinhood has had problems in the past, its stock has performed well, rising by 29% this year.
The Nasdaq Composite, a more inclusive stock market index, increased by 14% more than this. Investors are responding favorably to the company’s recent good news and stock performance, which demonstrate that it is progressing.
