Robinhood Markets Inc. accidentally sold short on a small stock as it went on a meme-like ride in December, costing the trading app more than the stock’s current market capitalization, executives disclosed Wednesday.
Cosmos Health Inc. COSM,
In an earnings call, Robinhood Chief Executive Vlad Tenev noted a “processing error on a corporate action” that was “really disappointing,” leaving Chief Financial Officer Jason Warnick to spell it out.
“A processing error caused us to sell shares short into the market, and although it was detected quickly, it resulted in a loss of $57 million as we bought back these shares against a rising stock price,” Warnick said.
When Cosmos Health effected a 1-for-25 reverse stock split that Friday morning in December, just hours after announcing its intentions, trading portals did not appear prepared. As MarketWatch reported on the day, TD Ameritrade publicly told Twitter users that the company had not received the newly issued shares to dole out to their clients as the stock spiked. A Charles Schwab Corp. SCHW,
The stock gains didn’t last through that Monday, though — after reaching as high as $23.84 on the day that Robinhood was apparently buying, they lost it all in after-hours trading and headed even lower after Cosmos Health announced an equity offering.
Shares closed Wednesday at $5.04, which gives Cosmos Health a market cap of about $53 million, according to FactSet — less than Robinhood executives said they lost on the Dec. 16 trades.
Robinhood shares were up in after-hours trading Wednesday after the trading app reported a fourth-quarter miss, but said the company would seek to buy back shares sold to disgraced cryptocurrency-exchange founder Sam Bankman-Fried and executives would forego $500 million in stock compensation. Robinhood stock has declined 21.8% in the past 12 months, as the S&P 500 index SPX,