The shares opened at $ 38 each, matching the price the company had agreed to sell its shares a day earlier and at the bottom of a target range marketed to buyers during its initial public offering. But stocks fell quickly, falling 12% to $ 33.35 by noon in New York.
The early drop from a 39% jump on the first day of the average US IPO shares this year, according to Dealogic data.
Robinhood, which sold 55 million shares, had set a range between $ 38 and $ 42 per share. While the hottest tech initial public offerings often sell above expectations, Robinhood’s stock has indicated that investor appetite – especially large fund managers who can make or break an IPO – was not insatiable for the actions of the brokerage house.
More than 49 million shares worth $ 1.8 billion changed hands within 30 minutes of it opening for trading. As of 1 p.m. in New York City, Robinhood was among the most actively traded stocks in the United States, overtaking Apple and Tesla in the number of shares traded.
The opening trade of $ 38 gave Robinhood a valuation of $ 32 billion, putting it in the orbit of other major brokers like ETrade, which had a stock valuation of $ 11 billion when it was purchased by Morgan Stanley last year. Private investors last August valued Robinhood at over $ 11 billion.
Goldman Sachs bankers led the IPO. As they began an auction process to establish a price for the first deal on Thursday, signs of a mixed reception for Robinhood quickly emerged. Early indications were that the stock would open at $ 42, but that fell as bankers scrambled to gauge demand for the stocks.
Robinhood, based in California, has become a place of choice for many first-time equity investors, offering commission-free trades that it has encouraged with rewards, bonuses and push notifications. With a median age of 31, its clients are often younger and have smaller account balances than those of established online brokerage firms such as ETrade, Schwab, and Fidelity.
It has experienced explosive growth, doubling the number of accounts on its platform since the start of the year to 31 million.
However, Robinhood has also been criticized by regulators for in-game functionality on its app, limited customer service, and reliance on a controversial practice of selling transactions called Pay for Order Flow. In June, the Financial Industry Regulatory Authority fined Robinhood $ 70 million for causing “widespread and significant harm” to its customers. It was the biggest penalty ever imposed by Finra.
On July 26, Finra opened another investigation into the brokerage regarding compliance with registration requirements, including whether co-founders Vlad Tenev and Baiju Bhatt failed to register with the regulator, according to an updated prospectus from the brokerage house.
The offer allocated up to 35 percent of the shares to Robinhood’s own clients. Modest appetite for the IPO suggested investors were not immune to the company’s recent scrutiny, as well as concerns about how the brokerage would maintain trading volumes. raised in a post-pandemic world in which people have time for other activities.
Tenev declined to say whether the retail allocation was fully subscribed in a Thursday morning interview with CNBC, but said it would be “one of the largest allocations ever made,” offering users Robinhood access to “what was once reserved for the 1% or the super-rich.”
Robinhood’s offer paves the way for a windfall for its executives and investors. When the stock market opened, Bhatt and Tenev’s shares were worth $ 3 billion and $ 2 billion, respectively.
Index Ventures, the company’s largest outside investor, has a $ 3.2 billion stake.
Robinhood’s extraordinary growth has periodically led to technical outages during periods of high volume. During a meteoric rise in shares of the GameStop meme stock in January, the platform had to halt trading and raise billions of dollars to meet the capital needs of market makers.
Investors who provided the $ 3.5 billion in emergency funding are expected to receive stocks at a 30% reduction from the offer price as their debt converts to equity.
Bhatt and Tenev will retain majority control of the voting rights over Robinhood through a dual class share structure, meaning they will have a minimum of 65% of the voting rights despite holding less than 20% of the voting rights. company shares.