Robinhood Stock Closes Rocky First Week of Trading Down 7.5%
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Robinhood might have driven sales of ‘meme stocks’ like Gamestop, AMC and meme-coin Dogecoin, but investors are less interested in shares in the popular stock and crypto trading app itself.
Robinhood’s IPO got off to an underwhelming start on Thursday, when HOOD shares closed their first day of trading at $34.82, an 8.4% drop from their opening price of $38. On Friday, HOOD clawed back just one percent to close the week at $35.15.
The closing price for the week concludes an ignominious debut for the platform that had been central to the retail investor revolution of the last year.
Robinhood had the single worst debut for an IPO of its size, underperforming Uber, Pepsi and MF Global in its opening trade. Back in 2019, Uber closed its first day with shares down 7.6% and, in 2007, MF Global closed its debut session 8.2% down.
On Wednesday, Robinhood and some of its existing investors sold 55 million shares for prices between $38 and $42. During the IPO, shares were priced at the bottom of that range.
The Wall Street Journal blames a large part of Robinhood’s chilly debut on the company’s retail-heavy “democratizing” strategy.
Before the IPO, Robinhood had earmarked 35% of shares for Robinhood’s existing customers. In an IPO like this, that number is usually under 10%. This allocation fell to 20-25% when Robinhood officially went public, according to WSJ, because many of the app’s users decided to pass on the company’s offer.
Robinhood also waived the usual six-month lockup for employees, allowing them to sell some of their shares right away; clearly, some did.
The app’s disappointing debut by no means seals its fate. With 18 million funded accounts, 9 million of which traded crypto in the app in the first quarter of this year, Robinhood is still thriving.
Facebook stock also famously struggled in its debut. Look how that turned out.
