Robinhood’s surging shares were halted on Wednesday after a massive spike, with some investors speculating that its dizzying rally is being driven by fears of a short squeeze.
Moments after the opening bell on Wednesday, the stock climbed as high as $85 — up a staggering 81 percent from Tuesday’s closing price of $46.80 and briefly giving the company a market capitalization of more than $65 billion.
But even as ‘HOOD’ reaches fresh highs, experts say all signs point to Robinhood being one of the most popular targets for short sellers. The stock borrow rate — how much it costs to borrow a stock and short it — is trading at unusually high levels. Typically, the borrow rates to short a stock is 0.5 percent. For Robinhood, the rate is 40 percent to 90 percent.
At a 90-percent stock borrow fee, short sellers need HOOD’s stock price to drop more than 7.5 percent over the next month and 22.5 percent over the next three months just to break even.
“It’s extraordinarily rare for rates to be this high,” Ihor Dusaniwsky of S3 Partners told The Post. “And that’s only if you can get the shares.”
More comprehensive Robinhood short data is expected next week.
Other traders note it’s the first day that investors can buy put and call options for Robinhood — and say that’s another reason the stock could be higher. Buying one call option gives traders the option to buy multiple shares of the stock at a certain price and those options can push stock higher.
“The availability of call options is adding to the surging price — exacerbating the hyperbolic move in the stock,” Tim Anderson, managing director at TJM Investments told The Post.
Mentions of Robinhood on the Reddit forum WallStreetBets have hit new highs. In the last 24 hours, Robinhood was mentioned 1897 times on the platform — compared with just 212 mentions of another popular meme stock AMC, according to data from Quiver Quant.