Robinhood IPO had ‘relatively small’ number of retail buyers: analyst

Robinhood’s IPO (HOOD) was the culmination of the retail investor theme that dominated 2021. The popular investment platform has 22.5 million users, but far fewer were interested in owning a part of the company in its public debut.

According to securities research firm Vanda, retail investors bought $ 18.85 million in shares of the company. Despite Robinhood’s relationship with this class of investors, it’s not a very high number, Vanda analysts wrote in a note on Friday.

“This is a relatively small number compared to other large IPOs,” the note said. “Didi, for example, saw retail investors buy $ 69 million in its early days and Coinbase took $ 57.35 million just a few months ago.”

There were previous indications that interest in the IPO would be lower than the company hoped: Robinhood’s stock was listed at $ 38, at the bottom of the range it was looking for, all the way down to 42. $. In addition, according to the Wall Street Journal, the amount of shares allocated to its clients was only 20 to 25%, the low end of the range that could have gone up to 35%.

Shares fell more than 8% on Thursday from the opening price of $ 38 to just under $ 35, possibly because many retail investors who would otherwise have wanted to buy already had access to them. they wanted it – and other investors wanted to take advantage of the shorter lock-up period to liquidate their positions.

Robinhood Markets, Inc. co-founder Baiju Bhatt and CEO and co-founder Vlad Tenev walk past the New York Stock Exchange (NYSE) after the company's IPO in New York, United States on 29 July 2021. REUTERS / André Kelly

Robinhood Markets, Inc. co-founder Baiju Bhatt and CEO and co-founder Vlad Tenev exit the New York Stock Exchange (NYSE) following the company’s IPO in New York, United States on 29 July 2021. REUTERS / Andrew Kelly

While it’s not unusual for a company’s shares to fall on day one of trading, the past two years have been marked by strong IPOs; Airbnb (ABNB) jumped 113% when it first hit the market. According to Nasdaq data, about a third of IPOs fall on day one, but so far this year the average IPO pop is 40.5%.

Each circumstance is, of course, individual, and one reason for the lukewarm performance of the first day could simply be related to doubts about the company – or its valuation. A price of $ 38 for Robinhood means a value of $ 32 billion for the company, which the market seems to think is too high. As a “tech company” and upstart from Silicon Valley rather than a more traditional company on Wall Street, it might have a momentum behind it, but it makes less money than its competitors, and there is no no guarantee that the incredible growth in 2020 and 2021 will continue.

Ethan Wolff Mann is a writer at Yahoo Finance who focuses on consumer issues, personal finance, retail, airlines, and more. Follow him on twitter @ewolffmann.

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