Robinhood (Nasdaq: HOOD), a company with a market capitalisation of about $18 billion, has announced its first share buyback plan. Under this plan, it will repurchase $1 billion worth of its shares over the next two to three years.
Robinhood’s Stock Buyback Plan
The stock buyback plan, announced yesterday (Tuesday) after the stock market closed, has already received authorisation from the retail broker’s board of directors.
“As our business and cash flow have continued to grow, we’re excited to announce a $1 billion share repurchase program to return value to shareholders,” said Jason Warnick, Chief Financial Officer of Robinhood.
Under the plan, management expects to start the repurchase program in the third quarter of 2024, which will continue for a period of two to three years. However, the brokerage has yet to provide a detailed plan for the buyback program, highlighting that it will depend on general business and market conditions, along with alternative investment opportunities.
Share buybacks are common among cash-rich companies. However, such programs are usually limited to established companies, not 11-year-old firms like Robinhood. Robinhood’s plan to buy back its shares also points to the fact that the company is coming out of the start-up phase, when young companies burn money to capture market share.
Robinhood Shares Pop
The markets reacted quickly to Robinhood’s stock buyback decision, as the company’s shares jumped by more than 4 percent after hours. Although Robinhood shares gained about 65 percent in 2024, the share price is still about 64 percent lower than the peak it touched in August 2021, after its market debut.
Movement of HOOD prices
Robinhood entered the retail stock brokerage industry in 2013, disrupting the space with its commission-free model. The platform quickly became popular among young traders.
Now, the company is generating a significant portion of its revenue from cryptocurrencies. As Finance Magnates reported earlier, it generated $126 million from cryptocurrency trading in the first three months of 2024, when its overall revenue reached $618 million, which received a boost from interest income of $254 million.
Meanwhile, Robinhood is also focusing on the expansion of its products and services across borders. It entered the European market last year and recently expanded its services there with the launch of crypto staking. However, in the US, the company is expecting regulatory enforcement actions due to its crypto offerings.