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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.
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.
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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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