The Robinhood (HOOD) IPO was the culmination of the 2021 retail theme that dominates. The popular investment platform has 22.5 million users, but the first day in the public markets saw far fewer buyers than usual.
According to securities research firm Vanda Track, private investors bought $18.85 million worth of shares in the company on the first day of trading. Despite Robinhood’s relationship with this investor class, it’s not a very high number, Vanda analysts wrote in a note Friday.
“That’s a relatively low number compared to other high-profile IPOs,” the note said. “For example, Didi saw retail investors buy $69 million on its debut and Coinbase raised $57.35 million just a few months ago.”
The reason is likely due to the company’s unique approach to allocating a significant number of shares to its retail investors to buy before the shares were traded. Robinhood planned to allocate between 20% and 35% of its approximately 55 million shares to its own clients through its app.
The company didn’t say what that last number was, but pointed Yahoo Finance to reports from other outlets suggesting between 20% and 25% – the lower end of the expected range.
If it’s somewhere in the middle, say 22.5% of the 55 million shares offered, that would be $470 million, making Robinhood’s stock still very popular with retail investors, even if it’s up to the low side of expectations.
On Thursday, shares were down more than 8% from its opening price of $38 to just under $35, perhaps because many of the retail investors who would have wanted to buy otherwise already had access if they wanted to — and other investors wanted to take advantage of the shorter lock-up period to liquidate their positions.
Other investors, such as Cathie Wood, bought 1.3 million shares.
There were other previous indications that interest in the IPO might be less than the company had hoped: Robinhood’s stock was priced at $38, at the lower end of the range it sought, to $42.
While it’s not that uncommon for a company’s stock to fall on the first day of trading, the past two years have seen solid IPO pops; Airbnb (ABNB) rose 113% on its market debut. According to Nasdaq data, about a third of the IPOs fall on their first day, but so far this year the average IPO pop is 40.5%.
Each circumstance is individual, of course, and one reason for the lukewarm performance on the first day could simply be due to doubts about the company – or its valuation. A stock price of $38 for Robinhood represents a value of $32 billion for the company, which the market believes is too high. As a “tech company” and a Silicon Valley startup rather than a more traditional Wall Street-esque company, it may have momentum, but it makes less money than its competitors, and there’s no guarantee that the incredible growth in 2020 and 2021 will continue. will continue with.
Clarification 07/31: This article and headline have been updated to clarify the pre-IPO retail buyers and the first retail buyers.