California-based Robinhood, the trading app at the center of the GameStop short squeeze in January, made its public debut on the Nasdaq on Thursday (July 29). The company's shares debuted at the lower end of its $38 to $42 price range, giving Robinhood a valuation of $32 billion. The company's shares debuted at the lower end of its $38 to $42 price range.
The company said it would allocate up to 35% of its offering to its own users. In the end, Robinhood customers got between 20% and 25% of the IPO, according to the Wall Street Journal. Normally, shares of a company going public are available only to institutions and not to individual investors before they start trading on exchanges.
“One of our company values is ‘participation is power,’” Robinhood Chief Executive Vlad Tenev said in an interview. “It didn’t seem right for us that IPOs had typically been reserved for the top 1%.”
The startup that disrupted how millions of Americans (especially millennials) invest, offering commission-free trades, has recorded explosive growth. The company's net revenue surged by 245% to $959 million in 2020, as its user growth and trading volume exploded. Since the start of 2021, it has doubled the number of accounts on its platform to 31 million.
However, Robinhood has also faced several lawsuits and regulatory challenges. On Tuesday, it said in a filing that the Financial Industry Regulatory Authority (FINRA) was investigating its founders’ compliance with registration requirements.
Last month, Wall Street's powerful self-regulator, slapped the brokerage with the biggest-ever fine in FINRA's history ($70 million), and accused the company of harming millions of customers and giving investors "false or misleading information."
Meanwhile, Robinhood's payments for order flow, or the money-brokerage firms receive for directing clients’ trades to market makers (a controversial business model and a big source of revenue), are under review by the Securities and Exchange Commission (SEC).
Goldman Sachs bankers led the IPO. Will the stock trading app become a “meme” stock? Time will tell.
The stock trading app's shares closed down 8.4% on their first day of trading, having earlier fell as much as 12%.The company failed to hit the $35 billion valuation it had coveted.