Trading app Robinhood Markets (HOOD.O) announced its first-ever share buyback plan on Tuesday, stating it will repurchase $1 billion worth of stocks as it aims to transition beyond its startup phase.
The company, renowned as the preferred app for retail traders, has been introducing new features to meet its customers’ demand for more sophisticated products. The buyback signifies Robinhood’s strategy to attract investors seeking signs of maturity before investing in the 11-year-old company. Stock buybacks are typically associated with more established companies.
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 after hours, poised to open at their highest since December 2021 if current gains persist.
Companies often repurchase stock when they believe it is undervalued. Despite Robinhood’s shares having gained nearly 61% this year up to Tuesday’s close, they remain 58% below their peak in August 2021. Since then, Robinhood has expanded its offerings, including a credit card launched for premium Gold subscribers in March, which has over 1 million customers on the waitlist.
Additionally, Robinhood introduced a retirement account in late 2022 and plans to launch trading in futures and index options later this year. Its core trading business has also experienced a recovery in recent quarters, as optimism for a soft landing of the U.S. economy encourages customers to re-engage with riskier assets like equities and crypto.
