Robinhood shares began trading Thursday under the ticker HOOD, opening on the public markets at $38 per share. The shares had also been priced at $38.
In the first half hour, the stock dropped around 5% to around $36.
The stock was expected to be priced between $38 and $42, coming in at the lower end of the range, and giving the company a valuation of $32 billion.
The investing app offers a simple and mobile-first way for investors to buy stocks, ETFs, and even cryptocurrency and played a key role in the retail trading boom we saw over the past year-and-a-half – another reason its IPO has been so hotly anticipated.
In an unusual move, the company offered about a third of its shares to its own users. Usually, companies do not offer shares to regular investors directly. Instead, someone who wants to buy a company’s stock on IPO day simply gets it on the public markets as you would any stock.
Another interesting approach with this IPO is restrictions for insiders to sell. Often investors are obligated not to sell for six months or so, but Robinhood is allowing its employees and others with stock to sell up to 15% immediately, and another 15% after three months. This means liquidity and flexibility for this group of investors, but also means an upward pricing factor typically seen is absent.
Robinhood had around 17.7 million users at the end of March, but since then has continued its growth spurt, reaching around 22.5 million — making it a serious player in the retail brokerage sector.
The IPO’s unique offering to its own customers may give it a competitive advantage — users invested in the company may be more likely to remain brokerage customers.
Regular investors could buy shares directly through the app at offering, which may mean fewer people to buy shares as trading begins, so observers will be watching to see how big the IPO pop is, if any. 2020’s IPOs had some of the biggest pops seen in recent memory, while 2021 has seen less of this effect.
Now, anyone — including Robinhood users — can buy the company's shares normally.
Getting the kinks out before going public
Though Robinhood is set to go public as a mature company, the startup mentality is barely in the rearview mirror.
The accident-prone company settled with FINRA for $70 million, the biggest fine in the authority’s history, right before announcing its plans to go public with an S-1. Among a laundry list of issues were outages, which occurred at times when trading volatility surged. (This was unrelated to the company's decision over the winter to pause buying of certain meme stocks like GameStop.)
In its preparation for IPO, the company has professionalized itself significantly from its Silicon Valley “break things” mentality that led it to carve out its position so quickly, upending how brokerages make money. One of the platform’s key innovations was not to charge fees for trading and instead allow users to make them for free.
Instead, the company makes a large portion of its revenue from payment for order flow, in which another company pays Robinhood for the right to process its trades at a price at or better than the prices of exchanges. (The company that executes Robinhood’s trade gets to know about how its investors are buying and selling — valuable information.)
Going forward, the public will have a much better glimpse at what is going on in the company, which only recently disclosed its user numbers and amount of assets in its custody, as well as pending litigation and other issues and risks.