Are Robinhood Users Making Penny Stocks Disappear?
As the market closed on Tuesday afternoon, only three companies listed on the Nasdaq exchange had a common share stock price below $1. When the market opened on Wednesday morning, there were none.
The last three stocks to regain the $1 threshold were:
China SXT Pharmaceuticals, Inc. (NASDAQ: SXTC)
Luokung Technology Corp. (NASDAQ: LKCO)
Acasti Pharma Inc. (NASDAQ: ACST)
This increased demand for low-priced stocks follows a surge of new investors that are downloading stock trading apps like Robinhood at a record pace.
Last month, the share price of GameStop Corp. (NYSE: GME) surged during a short squeeze. The media and internet glorified a few traders, including Keith Gill, who made millions off of risky bets.
And despite the fact that the price of GME stock has since collapsed, people have been drawn to the market in record numbers in the days and weeks that followed.
Robinhood reported over 600,000 new app downloads the Friday after GME exceeded $500 per share. Compare that to the 140,000 downloads on its busiest day of the market crash in March 2020.
Data shows that the lower-priced stocks have been getting a lot more attention as new traders are coming to the market.
Increased buying puts upward pressure on share prices.
Robinhood no longer releases precise popularity data, so we don’t know exactly what stocks are the most popular with its users. But it does provide a list of the 100 most popular stocks in no particular order. On Thursday morning, among the 100 most popular stocks on the app, 13 were trading under $5 and 24 under $10.
Companies with lower share prices are welcoming the new buyers. Nasdaq requires all stock listed on its exchange to maintain a minimum price of $1.
If a stock stays below $1 for 30 consecutive days, Nasdaq will begin a year-long delisting process.
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