Robinhood Launches First-Ever Share Buyback Plan, Signaling Maturity

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Robinhood Markets (HOOD.O), the trading app renowned for its appeal to retail investors, announced on Tuesday its first-ever share buyback plan, committing to repurchase $1 billion worth of stocks. This move marks a significant step as the company aims to transition beyond its startup phase and demonstrate maturity to potential investors.

Robinhood plans to execute the repurchases over a two to three-year period starting from the third quarter. Following the announcement, shares rose 4.3% to $21.34 in after-hours trading, positioning them to open at their highest level since December 2021 if current gains hold.

Share buybacks are typically associated with more established companies and are often seen as a sign of confidence in the company’s valuation. By initiating this buyback, Robinhood signals its belief that its shares are undervalued. Despite a nearly 61% increase in its share price this year up to Tuesday’s close, the stock remains 58% below its peak in August 2021.

In response to customer demand for more sophisticated products, Robinhood has been rolling out new features. Over 1 million customers have joined the waitlist for a new credit card launched for its premium Gold subscribers in March. Additionally, the company introduced a retirement account in late 2022 and plans to offer trading in futures and index options later this year.

Robinhood’s core trading business has experienced a recovery in recent quarters, driven by renewed customer interest in risky assets like equities and crypto amid optimism about a soft landing for the U.S. economy. The company’s earnings have surpassed market expectations for eight consecutive quarters, according to LSEG data.

Robinhood’s share buyback plan is a clear signal of the company’s growth and maturity. As it continues to expand its offerings and demonstrate financial resilience, Robinhood aims to solidify its position in the competitive trading app market and win over more investors.