Robinhood shares surge amid frenzied trading

Founders Baiju Bhatt and Vlad Tenev set up the trading platform while at university

Shares in the trading platform Robinhood have surged, amid speculation the firm could be seeing the same frenzied trading that surrounded the video game retailer Gamestop.

The stock climbed as much as 82% on Wednesday, with trading paused several times due to wild price swings.

It follows a lacklustre stock market debut for the firm, which is popular with young investors but controversial.

Some bigger investors have shunned the company for being too risky.

Robinhood's commission-free trading has proved hugely popular with amateur traders during lockdown, with the number of account holders doubling to 31 million since January.

• Robinhood has a muted stock market debut

• Robinhood boss: GameStop episode 'unacceptable'

However, it faced disappointment last Friday when its shares dived on their first day of trading, ending the day at around $36.

On Wednesday, though, the stock rose as high as $85 before falling back. It meant that at points Robinhood was worth more than famous blue chip companies such as Kraft Heinz and Ford.

Part of the reason, analysts believe, is that in line with its mission to "democratise finance" the firm has put around a third of its stock into the hands of everyday retail investors - an unusual move on Wall Street.

Now it appears frenzied trading by these investors may be pushing up the price.

It has echoes of the Gamestop saga in Janaury, which saw users of the social media platform Reddit buy up shares in the games retailer to drive up the price.

At the time, much of the action took place on Robinhood, with the platform even suspending trading at one point, angering some investors.

Robinhood was by far the most mentioned stock over the past 24 hours on WallStreetBets, the Reddit thread at the centre of the Gamestop rally, according to research firm SwaggyStocks.

Meanwhile retail trading in Robinhood shares was up tenfold on Tuesday, according to Vanda Research.

Dan Ives, an analyst at Wedbush Securities, told the BBC: "This speaks to massive retail interest in this name at the moment and is an eye popping move for Robinhood that reminds investors of the 'meme stock' phenomenon."

A vote of confidence in Robinhood by star stock picker Cathie Wood, who heads the Ark Invest asset management firm, has also helped sentiment.

The firm increased its holding in Robinhood on Tuesday by 89,622 shares, and the stock now amounts to about 1% of its portfolio.

It comes after many institutional investors shunned Robinhood's initial public offering over fears it could face a regulatory crackdown.

The platform has faced criticism for exposing amateurs to risky products such as meme stocks and cryptocurrencies.

In June, it was fined $70m by a US regulatory body that said it harmed thousands of consumers through "false and misleading" communications.