Robinhood Flounders in Market Debut, End First Day Down 8%
After years of hype and some high-profile missteps, yesterday the stock trading app Robinhood went public, hitting the Nasdaq under the ticker symbol $HOOD. Unfortunately, the FinTech faltered in its debut, closing down 8% from its opening price. What’s more, the $38 IPO share price was on the low end of the company’s targetted pricing range.
Robinhood’s public offering was always set to be one to watch for a number of reasons. First, the IPO comes during what’s been a tumultuous year for the company. Most notably, the platform took flack from users and lawmakers alike when it decided to temporarily restrict trades on volatile stocks such as Gamestop and AMC earlier this year. Nevertheless, the company continued to show user growth while garnering continued investment from venture capital firms and others.
Another unique aspect of Robinhood’s public offering was that the FinTech made a point to offer a significant number of shares to its users directly. This was made possible via the app’s recently launched IPO Access feature. With this tool, customers could view the company’s prospectus, place a request for shares, and hope to have their order fulfilled. According to listing in the “Past” section of this IPO Access feature, 301,573 Robinhood customers invested in the company’s IPO.
Aside from its public relations troubles, another potential reason that Robinhood’s IPO hasn’t taken off is that the brokerage landscape looks a lot different now than when the app hit the market. Not only is there increased competition from fellow FinTechs but several traditional discount brokerages have since followed Robinhood’s lead in offering commission-free trading. This reality is likely why the company has worked to bring additional features to the app, such as the aforementioned IPO Access.
Meanwhile, the company has also benefitted from a surge in cryptocurrency interest. However, at this time, the app does not allow customers to transfer crypto holdings to an external wallet. In an IPO “roadshow” livestream, Robinhood CEO Vlad Teniv acknowledged this missing feature, stating, “We’ve been doing a lot of work behind the scenes to provide our crypto customers with the functionality that they’ve been asking for. We know you want wallets.”
Overall, while Robinhood’s IPO may have been disappointing — and will surely make the company an even larger punching bag among betrayed traders — it’s likely too early to count the company out so soon. While they certainly face headwinds, the FinTech has managed to prevail before. Therefore, we’ll need to see where the company and its stock head from here.