Robinhood Markets Inc. was sharply lower after the company said existing shareholders were planning to sell up to 97,9 million shares.
The Menlo Park, California-based trading app developer will not receive any proceeds from the sale.
Some investors are seeking to reduce their stakes after the initial public offering of shares. As an investor, they are expected to join an early venture capital firm, like entities affiliated with Ribbit Capital and Andreessen Horowitz.
Robinhood shares had surged 87% over the previous two sessions as retail investors bought into the stock. The rally propelled stock past the initial public offering price of $38 last week.
Robinhood was the fourth most favored stock by retail investors, according to data released by Vanda Securities.
Those investors piled into the stock after a regulatory filing showed ARK Invest CEO Cathie Wood raised her stake to more than 3.2 million shares.
However, many Wall Street pros think Robinhood's business model is not built to last.
Robinhood is a pony with one way to make money -- getting paid for order flow -- Jeff Sica, founder of Circle Squared Alternative Investments, told FOX Business on Wednesday. Once this frenzy ends, I anticipate this stock is going to drop like a rock.