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Anticipation is building in the banking sector as the reporting season kicks off and the Westpac Banking Corp (ASX: WBC) share price is tipped to be the biggest winner.

That’s the view from Morgans as the broker believes the WBC share price will close the gap with the outperforming Commonwealth Bank of Australia (ASX: CBA) share price.

This isn’t to say that the broker has dour expectations for CBA. In fact, its feeling bullish for the entire ASX banking sector during this reporting season.

CBA to set the mood for ASX banking sector

But it’s the Commonwealth Bank of Australia (ASX: CBA) share price that’s stealing the spotlight as it’s the only one of the big four that will hand in its half year report card.

As the financial year end for the WBC share price, Australia and New Zealand Banking GrpLtd (ASX:ANZ) share price and National Australia Bank Ltd. (ASX: NAB) share price are in September, they will only issue trading updates.

What CBA reports will set the tone for the rest of the sector and Morgans sees upside risks to its earnings and dividend forecasts for the sector. This is despite being more bullish than consensus.

Multiple tailwinds

“While we continue to appear to have the lowest FY21 credit impairment charge forecast on the street for each major bank, we believe our forecasts are looking increasingly conservative,” said Morgans.

“That is, we are seeing increasing upside risk to our earnings and dividend forecasts for FY21.”

The big drop in the number of COVID-19 deferred loans, rising house prices and the bounce in economic activity are supporting the positive outlook for ASX banks.

Upside risks for ASX bank earnings and dividends

“We see potential for favourable revisions to macroeconomic assumptions and probability weights in the Dec-20 quarter,” added Morgans.

“This is because the unemployment rate and house prices have fared better than assumed in the banks’ base case scenarios for provisioning.”

The large valuation gap between CBA and WBC

But it’s this optimism that will drive the outperformance of the WBC share price at the expense of the CBA share price.

The WBC share price has been lagging the pact. I believe this is due to concerns about the strength of its balance sheet as WBC is the most likely to need to raise capital compared to the other three big banks.

On the other hand, the CBA share price fared the best as it holds the strongest balance sheet in the group.

Why the WBC share price can outperform CBA

“However, as investor confidence in banks increases, we believe investors will place a more normal weighting on risk profiles and pay more attention to valuations,” said Morgans.

“Consequently, we expect CBA’s share price to underperform the other major banks and we expect WBC’s share price to outperform the other major banks over the next 12 months.”

More reading

• ASX 200 up 0.75%: REA Group and News Corp impress, big four banks charge higher
• ASX shares to rocket 6% this year
• Here’s how ASX equal-weight ETFs stack up to index funds
• ASX 200 falls 0.9%, Nick Scali reports, Vulcan jumps
• What to expect from the Commonwealth Bank (ASX:CBA) half year result

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited, and Westpac Banking. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Vonex Ltd (ASX:VN8) shares have exploded today after the company announced a multi-year wholesale agreement. In morning trade, the Vonex share price rocketed to an all-time high of 32.5 cents. However, some investors were quick to take profits, slightly retracing the company’s shares to 32 cents, at the time of writing, up 23.08%.

What’s driving the Vonex share price to new highs?

The Vonex share price is on the rise today as the company secured another contract to complement its wholesale business.

According to this morning’s release, Vonex advised it has signed a multi-year wholesale agreement with Orange Business Services, through its wholly-owned subsidiary, 2SG Wholesale.

Headquartered in Paris, France, Orange Business Services is a communications solutions company servicing over 220 countries. The group provides hardware, cloud computing, voice and data management, network infrastructure, multimedia, security, supply chain management, and collaboration services.

Under the agreement, Vonex will provide business-grade mobile broadband services to Orange Business services across Australia. The deal will be used to support the launch of new products that will offer the latest connectivity for Orange Business Services’ customers. These include clients operating within industries such as automotive, mining, oil & gas and public sectors.

Vonex noted that the latest contract award reflects its growing wholesale business. The company aims to deliver best-in-class products and services to both new and existing telco customers.

What did management say?

Vonex managing director Matt Fahey welcomed the deal, saying:

We are delighted to partner with Orange to support Orange Business Services’ expansion plans in Australia. Signing this agreement is testament to the growth and maturity of our offer to small, medium and enterprise customers, as we are seeing strong growth across both existing and newly-launched products.

Orange managing director of Australasia Kevin Griffen went on to add:

With this agreement, Orange will offer enterprises the ability to combine NBN connectivity with wireless broadband services through one provider only. This will bring great simplicity as well as strong, fast and stable connection which were once reserved for MPLS and the largest companies.

Vonex share price snapshot

Incorporating today’s surge, the Vonex share price has risen more than 190% over the past year and over 400% from its March lows.

Based on the current Vonex share price, the company commands a market capitalisation of around $50 million.

More reading

• Westpac (ASX:WBC) share price to close gap with CBA (ASX:CBA) says Morgans
• Should you buy ASX shares that are takeover targets?
• ASX 200 up 0.75%: REA Group and News Corp impress, big four banks charge higher
• What’s with the Splitit (ASX:SPT) share price today?
• Why Magellan, News Corp, REA Group, & Temple & Webster shares are racing higher

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Most times it’s music to an investor’s ears when one of their stocks will be bought out by another company.

The takeover usually involves a purchase price higher than the market price, so there is a handsome profit involved. The buyer is hardly going to low-ball the existing shareholders, otherwise they won’t approve the sale.

One recent example on the ASX is Amaysim Australia Ltd (ASX: AYS).

The telecommunications provider is currently in the midst of a takeover from listed investment company WAM Capital Limited (ASX: WAM). WAM offered 70 cents for each Amaysim share in cash or 85.6 cents per share in WAM stock.

This gave Amaysim’s shareholders a 15.6% premium to the one-month volume-weighted average price after the end of October.

So should investors try to buy up shares that could become takeover targets?

Takeovers only happen on the way up

Forager chief investment officer Steve Johnson said that cheap stocks often end up with a takeover as the happy ending for investors.

But they rarely happen for companies enduring a difficult time.

“You tend to see them once the business has at least turned around,” he said on a Forager video.

“Once it’s recovered and the share price is reasonably fair and then someone can pay a sense of premium to that and everyone is happy.”

He took advertising agency WPP Aunz Ltd (ASX: WPP) as an example in the Forager Australian Shares Fund (ASX: FOR) portfolio.

WPP AUNZ in December received a buyout offer from its parent WPP PLC (LON: WPP).

“That takeover bid is 70 cents compared to a share price that was down in the 20s back in March, and maybe early 40s when we first bought it.”

According to Forager senior analyst Alex Shevelev, the company transformed during the COVID-19 period to improve its performance.

“During calendar 20, the management team was doing some pretty good things to try to get the business back onto even ground. They were cutting costs,” he said.

“The parent company that already owned 62% of WPP, of course, was aware of what was going on there and that things were improving. Clearly they felt that was a good opportunity to launch a bid for the remaining portion that they didn’t own.”

Relying on takeovers for returns: right or wrong?

This is why investors should not be solely relying on the possibility of a takeover for return on investment, according to Johnson.

“If you’re relying on them for value realisation then you’re in trouble — because it means something else has gone wrong with your investment,” he said.

“That’s my advice to everyone: Make money and pay dividends, and if we get a takeover then that’s the cream on the cake — not the reason that we own the stock.”

The next likely ASX takeover 

Shevelev named Eclipx Group Ltd (ASX: ECX) as another company with huge potential for a buyout.

It plays in the car fleet management industry where economies of scale are “very dramatic”.

“So if you had an acquisition of this business by one of the other two players… the synergies across that group would be very significant,” he said.

“That’s coupled with a restriction on the number of deals that can be done here because the industry is getting quite consolidated after a period of mopping up of smaller players.”

Johnson agreed that Eclipx is “a good example”.

“I think the economic rationale for it in that sector is very significant.”

More reading

• 3 forgotten ASX stocks left behind in the car sales recovery
• Stop worrying about a market crash: Do this instead
• 4 ASX shares that helped this fund outperform in December
• Why this top broker thinks the Telstra (ASX:TLS) share price could surge ~40%
• The ASX 200 stock facing a day of reckoning at the February reporting season

Motley Fool contributor Tony Yoo owns shares of WAM Capital Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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At lunch on Friday the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a high. The benchmark index is currently up 0.75% to 6,816.8 points.

Here’s what is happening on the market today:

REA Group half year update impresses

The REA Group Limited (ASX: REA) share price is pushing higher today after reporting strong half year profit growth despite softer revenues. Due partly to the Melbourne lockdowns, REA Group posted a 2% decline in half year revenue to $430.4 million. However, thanks to its excellent cost control, the company’s net profit after tax grew 13% over the prior corresponding period to $172.1 million. Management also spoke positively about the future, noting that “Australia’s property market appears to be on the march again.”

News Corp shares rocket

The News Corporation (ASX: NWS) share price is rocketing higher today after the media giant revealed its most profitable quarter since the new News Corp was launched more than seven years ago. According to the release, the company posted a 3% decline in second quarter revenue to US$2.48 billion. However, stronger margins led to News Corp reporting quarterly net income of US$261 million. This was up from US$103 million a year earlier.

Bank shares push higher

The big four banks are all pushing higher on Friday and are helping to underpin the ASX 200’s strong performance. While all four banks are outperforming the market, the best performer has been the National Australia Bank Ltd (ASX: NAB) share price with a 1.4% gain. NAB is scheduled to release its first quarter update on 16 February. Some investors appear confident this update will be a positive one.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Friday has been the News Corp share price with a 13% gain. This follows the release of its second quarter update. The worst performer has been the Janus Henderson Group CDI (ASX: JHG) share price with a 3.5% decline. A solid quarterly update by the fund manager was overshadowed by news that one of its largest shareholders is selling its stake.

More reading

• Why Magellan, News Corp, REA Group, & Temple & Webster shares are racing higher
• Why is the News Corp (ASX:NWS) share price rocketing 12%?
• Why the REA Group (ASX:REA) share price is pushing higher
• Why the Janus Henderson (ASX:JHG) share price is sinking 7% today
• ASX shares to rocket 6% this year

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Splitit Ltd (ASX: SPT) shares are seesawing this morning following the company’s announcement of an approved receivables funding facility. Following the release, the Splitit share price leapt 4.2% to an intraday high of $1.50. 

At the time of writing, however, shares in the buy now, pay later (BNPL) company have retreated to $1.435, down 0.35%.

What did Splitit announce?

The Splitit share price is jumping about after the company reported it has secured a line of credit to fund its growth and capital management strategies.

According to its release, Splitit announced it has signed a US$150 million receivables funding facility with Goldman Sachs.

The newly approved line of credit not only doubles Splitit’s existing credit facilities, but paves the way for significant expansion. With a term of three years, the revolving line of credit will be used to support growth in United States and European markets.

Splitit revealed it will provide support to merchants though funding, as well as implementing a structure to facilitate additional jurisdictions.

Pleasingly for the company, the loan is attracting a lower cost than its existing debt facilities. Splitit noted that relying less on the more expensive loans, and using Goldman Sacks’ line of credit, will increase the company’s gross margins in the long run.

Words from the CEO

Splitit CEO Brad Paterson commented on what the new receivables funding facility will do for the company. He said:

This large committed facility from Goldman Sachs is a key pillar of our Merchant Sales Volume growth strategy. Demand from merchants in the US and Europe for our funded model has never been stronger, and coupled with our existing strong balance sheet, we now have the foundations in place to accelerate our growth plans whilst also driving improved margins.

Splitit share price summary

Over the last 12 months, the Splitit share price has accelerated more than 180% on the back of rising demand for its services.

The company’s shares suffered a short-term shock when COVID-19 hit international markets in March, sending its shares to an all-time low of 20 cents. However, following the Australian Government’s stimulus packages, the Splitit share price roared back to life. The company’s shares reached a record high of $1.93 in late August 2020.

Based on the current share price, Splitit commands a market capitalisation of around $650 million.

More reading

• 3 reasons to consider Sezzle (ASX:SZL) at this share price
• Splitit (ASX:SPT) share price slides despite record quarter
• Why Bathurst Resources, Megaport, Orocobre, & Splitit shares are dropping lower
• ASX 200 rises 0.4%
• Could this be why Afterpay (ASX:APT) and other BNPL shares are soaring today?

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post What’s with the Splitit (ASX:SPT) share price today? appeared first on The Motley Fool Australia.

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In late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a high. At the time of writing, the benchmark index is up 1% to 6,834.2 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are racing higher:

Magellan Financial Group Ltd (ASX: MFG)

The Magellan share price has stormed 6% higher to $50.56. This follows the release of the fund manager’s latest funds under management update. According to the release, Magellan experienced net inflows of ~$223 million in January. This included net retail inflows of $85 million and net institutional inflows of $137 million.

News Corporation (ASX: NWS)

The News Corp share price has jumped 13% to $28.29 following the release of its second quarter update. Although the media giant’s update revealed a 3% decline in second quarter revenue to US$2.48 billion, this didn’t stop it delivering strong profit growth. News Corp reported quarterly net income of US$261 million, which is up from US$103 million a year earlier. This was its most profitable quarter since the new News Corp was launched more than seven years ago.

REA Group Limited (ASX: REA)

The REA Group share price is up 3% to $159.15 after delivering solid half year profit growth. According to the release, for the six months ended 31 December, the property listings company reported a 2% decline in revenue to $430.4 million. However, thanks to a 13% reduction in operating expenses, the company’s net profit after tax increased 13% to $172.1 million.

Temple & Webster Group Ltd (ASX: TPW)

The Temple & Webster share price has surged 8% higher to $10.97. This is despite there being no news out of the online furniture and homewares retailer. However, REA Group spoke positively about the Australian housing market in its update. This may have sparked hopes that it will support demand for Temple & Webster’s products. 

More reading

• Why is the News Corp (ASX:NWS) share price rocketing 12%?
• Why the REA Group (ASX:REA) share price is pushing higher
• 2 fast-growth ASX tech shares that are being sold off
• 5 things to watch on the ASX 200 on Friday
• Why Alliance Aviation, REA Group, SEEK, & Vulcan shares are charging higher

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended REA Group Limited and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why Magellan, News Corp, REA Group, & Temple & Webster shares are racing higher appeared first on The Motley Fool Australia.

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Buying dividend stocks to make a passive income could become increasingly popular in 2021. After all, the income returns of other assets such as cash and bonds are likely to remain disappointing due to low interest rates. Meanwhile, high property prices may restrict their capacity to provide a generous passive income.

Of course, determining what are the best types of dividend shares to buy could be a challenge due to uncertain economic conditions. However, by focusing on competitive advantages, dividend affordability and defensive characteristics, it may be possible to unearth the most attractive income shares for the long run.

Dividend stocks with competitive advantages

Given the uncertain economic outlook, buying dividend stocks that have significant competitive advantages could be a shrewd move. They may be more likely to deliver relatively strong sales and profit during a challenging period for their sector. For example, they may have strong customer loyalty or unique products that allow them to maintain higher margins than are possible among their competitors.

Businesses with significant competitive advantages may also be able to grab market share from weaker sector peers. This may lead to an improving financial performance in the long run that produces a more resilient, and growing, dividend over the coming years.

Defensive characteristics

Dividend stocks with defensive characteristics may provide a more robust income return in 2021. At the present time, it remains unclear how factors such as the coronavirus vaccine will play out. This could mean there is a further period of lockdown measures that lead to poor financial performance from companies that are closely correlated to the prospects for the economy.

As such, buying defensive shares may provide greater security during what could prove to be a challenging year for many industries. In some cases, it is also possible to achieve a high yield from defensive shares. They have not always been popular among investors in recent months because of an increasing focus on growth stocks that are often cyclical in nature. This may provide scope for a higher income return in the coming months.

A low payout ratio

Due to the potential for reduced sales and profitability in the current year, buying dividend stocks that have low payout ratios could be a sound move. A company’s dividend payout ratio can be calculated by dividing its dividend by net profit to give a percentage figure. A payout ratio of less than 100% shows it had headroom when making its most recent dividend payment.

At the present time, it may be prudent to seek companies with a payout ratio of significantly less than 100%. Otherwise, there may be a risk of a dividend cut should their financial performance deteriorate in the short run. Conversely, low payout ratios could mean impressive dividend growth in the coming years that boosts an investor’s passive income.

More reading

• What’s with the Splitit (ASX:SPT) share price today?
• Why Magellan, News Corp, REA Group, & Temple & Webster shares are racing higher
• Why is the News Corp (ASX:NWS) share price rocketing 12%?
• Why the 5G Networks (ASX:5GN) share price is charging higher
• Why the OM Holdings (ASX:OMH) share price is rising today

Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post How I’d determine the best types of dividend stocks to buy in 2021 appeared first on The Motley Fool Australia.

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News Corporation (ASX: NWS) shares are rocketing higher in early morning trade. This comes after the global media and information services company released its financial results for the three months ending 31 December (Q2 FY2021). At the time of writing, the News Corp share price has surged 12.02% to $28.15.

What was announced?

The News Corp share price is on a tear this morning despite the company reporting total revenue for Q2 FY2021 of $2.41 billion — a 3% decline from FY2020 Q2 revenue. News Corp said lower revenue at its News Media segment was mostly responsible for the decline. This included a 1% negative impact in its Australian market after the company closed a number of community newspapers, some of which transitioned to digital.

The rest of the figures released by the company, however, were all up from the previous corresponding period, likely accounting for the positive momentum surrounding the News Corp share price today.

Adjusted revenues increased by 2%.

Net income was $261 million, up from $103 million for the same quarter in the previous year.

Total Segment earnings before income, tax, depreciation and amortisation (EBITDA) of $497 million was up 40% compared to the corresponding quarter, when EBITDA came in at $355 million. The company credited improved operating trends and cost reductions, along with an $18 million positive impact from foreign currency fluctuations for the better results.

Diluted net income per share was 39 cents as compared to 14 cents in Q2 2020.

Adjusted earnings per share (EPS) was 34 cents, up from 18 cents the previous year.

Commenting on the results, News Corp chief executive Robert Thomson said:

The second quarter of fiscal 2021 was the most profitable quarter since the new News Corp was launched more than seven years ago, reflecting the ongoing digital transformation of the business. We reported the largest profits for Dow Jones since the acquisition of the company in 2007, with Segment EBITDA increasing 43 percent and traffic across the Dow Jones digital network surging 48 percent.

There was also a 77 percent rise in Segment EBITDA at the Subscription Video Services segment, where the exponential evolution at Foxtel continued apace…

In the Book Publishing segment, HarperCollins’ revenues rose 23 percent, with double digit growth across every category, and a 65 percent burgeoning of Segment EBITDA. And history was also made at the New York Post, which reported its first profit in modern times.

News Corp share price snapshot

The News Corp share price was not immune to last year’s COVID-fuelled market selloff. From late February through to early April 2020, News Corp shares tumbled more than 41%. But the company proved resilient. The share price is now up around 110% from those lows.

With this morning’s intraday moves taken into account, the News Corp share price is up nearly 35% over the past year and almost 22% so far in 2021.

For comparison the S&P/ASX 200 Index (ASX: XJO) is up 2% in 2021.

More reading

• 4 most trusted ASX companies (and the 4 least trusted)
• Telstra (ASX:TLS) dumps NRL, AFL streaming
• Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The 5G Networks Ltd (ASX: 5GN) share price has been a positive performer on Friday morning.

At the time of writing, the telecommunications carrier’s shares are up 3% to $1.57.

Why is the 5G Networks share price pushing higher?

Investors have been buying 5G Networks shares this morning after it revealed that it expects to report a record first half profit.

According to the release, for the six months ended 31 December, 5G Networks expects to report revenue in the range of $27.5 million to $28.5 million. This will be a 10% to 14% jump on the prior corresponding period.

Thanks to the widening of its earnings before interest, tax, depreciation and amortisation (EBITDA) margin from 12% to 13%, management expects to report a record EBITDA of $3.5 million to $3.8 million.

This represents an increase of 16.7% to 26.7% compared to the same period last year.

Webcentral acquisition completes

In addition to this update, the company has revealed that the takeover of Webcentral is now complete.

Management spoke very positively about the acquisition and sees numerous growth opportunities.

It commented: “5GN currently provide numerous Cloud, Telecommunications and Managed IT services to WCG; these services represent our core strengths. The strategic business relationship will continue to expand, with 5GN now seeking to leverage WCG capacity for software code development for operational improvement and automation across our service delivery platforms.”

“Importantly, the acquisition of WCG has enabled 5GN to fast track its exposure to the SMB market and WCG’s 330,000 existing customers via its online sales portal. Additionally, 5GN will also develop a comparable e-commerce system as used in the WCG portal to deliver low touch, automated services to its wholesale clients.”

“5GN continues to add to its strong track record for prudently completing acquisitions that bring accretive value through increased earnings and growth. This most recent acquisition in particular sets the stage for the next phase of 5GN’s strategy for continuing its vertical integration across the industry,” it concluded.

More reading

• New twist in 5G Networks (ASX:5GN) takeover of ASX-listed Webcentral

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

GameStop — the mall-based videogame chain — was dying slowly for years until Robinhood investors came along to try and save it. Over five frenzied days of trading last week, GameStop stock grew five-fold in price — at one point Friday, it was up by more than seven-fold — bringing some long-term GameStop investors’ gains to more than 1,625% just in the month of January.

Urged on by social media posters on Twitter, Reddit, and TikTok, and attracted by advertisements from the commission-free, smartphone app-based brokerage, lots of new investors joined Robinhood and used its no-fee trading platform to purchase options in and shares of GameStop. Some of those investors then quickly moved on to other heavily shorted equities, AMC Entertainment, BlackBerry and Nokia among them.

One by one, shorts were squeezed, share prices surged, and investors got richer … until all of a sudden the gains stopped. Some major brokerages, including Robinhood, ceased trading on several highly volatile stocks. The abruptness of the move left investors confused and upset, unclear of why this was happening, and unaware of the complex inner workings of brokerages that might have caused it to happen.

And so the complaining began:

@oneilthomas97

There’s a whole class war going on in the middle of a pandemonium #stocks #amc #gme #nok #nakd #robinhood #stocktock

♬ original sound-Lubalin

https://www.tiktok.com/embed.js

@mercyojo

Hold people hold! #stockmarket #stockstobuy #robinhood #fypthis

♬ original sound-sounds for slomo_bro!

https://www.tiktok.com/embed.js

As of Monday, the company had settled upon the compromise of limiting trading in just eight specific stocks:

Company	Maximum Shares Traded Per Account	Maximum Options Contracts Per Account
AMC (NYSE: AMC)	10	10
BlackBerry (NYSE: BB)	700	700
Express (NYSE: EXPR)	20	20
GameStop (NYSE: GME)	1	5
Genius Brands (NASDAQ: GNUS)	600	600
Koss (NASDAQ: KOSS)	2	n/a
Naked Brand (NASDAQ: NAKD)	600	n/a
Nokia (NYSE: NOK)	2,000	1,000

But this was a compromise Robinhood’s users had never bargained for, nor agreed to — and they didn’t take it well. 

@claire.lolz

#capitalism #stocks #robinhood #comedy

♬ Rasputin (7″ Version)-Boney M.

https://www.tiktok.com/embed.js

@robinhoodkid

Got a little feisty on that 3rd point. #robinhood #ceo #GME #AMC #gamestop #girlstalkstocks #moneytok #fintok #stocktok #viral #fyp

♬ Who Is She-Qveen Herby

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In short, in the absence of a quick and clear explanation of federal regulations that might have necessitated the move and any about Robinhood’s (and others’) liquidity problems, the company’s investor base concluded that Robinhood management was simply in league with the hedge fund operators. It was, so the thinking went, limiting trading in order to protect the hedge funds’ “billions” from the “normal people.”

(In fact, in a lawsuit filed last Thursday, aggrieved Robinhood traders alleged just this: That “Robinhood’s actions were done purposefully and knowingly to manipulate the market for the benefit of people and financial institutions who were not Robinhood’s customers.”)

Now, the company is facing some significant legal headaches and potential liability. After growing its user base from 3 million to 13 million last year alone (according to NBC), Robinhood is at risk of squandering all that growth, and losing the faith of its clients. Management insists that its loyalty to “everyday investors” remains unchanged, that it never wanted to prevent people from buying the stocks in question, and only limited trading because of “clearinghouse-mandated deposit requirements.”    

But some Robinhood users aren’t buying it. They want an apology from the CEO, a clearer explanation of what went wrong — and a promise to fix it. Failing that, many of them may simply leave Robinhood — forever.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Did Robinhood lose its investor base forever? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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