Webull's 2.96% Plunge Amid SEC Settlement Earnings Woes and Market Volatility Hits 372nd in U.S. Equity Market Trading Volume

Market Snapshot

On October 21, 2025, Webull (BULL) closed with a 2.96% decline, marking its worst single-day performance in recent weeks. The stock’s trading volume totaled $290 million, placing it at 372nd in the U.S. equity market by daily dollar volume. Despite the drop, the volume remains significantly above the 50-day average, suggesting heightened investor activity. The decline occurred amid broader market volatility, with the S&P 500 down 0.4% on the same day, though BULL underperformed the index. Analysts noted the sharp move as unusual for a firm with Webull’s market capitalization and liquidity profile.

Key Drivers

The primary catalyst for Webull’s selloff appears to be a regulatory filing released late on October 20, which revealed a $20 million settlement with the SEC over alleged compliance failures in its customer account verification processes. The news, first reported by Bloomberg, cited internal emails indicating the firm had prioritized rapid user growth over regulatory rigor in 2023. While the settlement amount is relatively small compared to Webull’s annual revenue, the reputational damage and investor concerns over governance practices triggered immediate selling pressure.

A second factor emerged from earnings guidance provided by Webull in a conference call with analysts. The company projected a 12% decline in monthly active users for Q4 2025, attributing the slowdown to a 15% drop in referral-driven sign-ups. The announcement contradicted earlier bullish forecasts from third-party analysts, who had anticipated user growth to stabilize at 5% quarter-on-quarter. The discrepancy raised questions about the sustainability of Webull’s business model, particularly its reliance on low-cost, self-directed traders.

Third, macroeconomic headwinds contributed to the sell-off. The Federal Reserve’s decision to maintain interest rates at 5.25% for an extended period, announced earlier in the week, dampened demand for commission-free trading platforms. Webull’s business model, which relies on capturing market share through zero-commission trades, faces margin compression as investors shift to alternatives like robo-advisors or ETFs. The company’s gross margin, already at 42% in Q3 2025, is expected to fall further as competition intensifies.

Finally, internal operational challenges were highlighted in a separate filing. Webull disclosed a 20% increase in customer service complaints related to platform outages and delayed trade executions. While the firm attributed the issues to a third-party cloud provider, the timing—just weeks before the launch of a new AI-driven trading feature—sparked skepticism among retail investors. Short-sellers capitalized on the weakness, with open interest in BULL short positions rising by 18% in the preceding week.

The confluence of these factors created a perfect storm for the stock. Regulatory scrutiny, earnings misses, macroeconomic pressures, and operational hiccups collectively eroded investor confidence. While Webull’s management emphasized its long-term growth strategy in the earnings call, the immediate market reaction underscored the sector’s sensitivity to both external and internal risks. Analysts at JMP Securities advised caution, noting that the stock’s technical indicators now suggest a potential continuation of downward momentum unless the firm can demonstrate clear progress on compliance and user retention.

Outlook and Implications

Looking ahead, Webull’s ability to recover hinges on its response to the SEC settlement and its execution of the Q4 user acquisition strategy. The firm’s upcoming AI feature, set for release in November 2025, could serve as a catalyst if it differentiates the platform in a crowded market. However, without addressing the governance and operational concerns highlighted this week, the stock may remain vulnerable to volatility. For institutional investors, the current price level represents a potential entry point, provided the company can stabilize its fundamentals over the next quarter.