The Strategist

Robinhood's IPO valuation reaches $32B

07/30/2021 - 10:27

Fintech startup Robinhood, which has developed a popular app for retail investors, raised $2bn in its IPO. Its shares traded at $38, the lower end of a previously established $38-$42 price range. Robinhood's shares will begin trading on NASDAQ on Thursday under the ticker symbol HOOD.
Robinhood's IPO didn't follow the traditional pattern: while usually the bulk of shares in an offering are sold to large institutional investors, in this case about a third of all shares were sold to individual investors. This was done through the recently launched Robinhood platform, which allows small investors to buy shares in the IPO before the stock exchange begins trading. Unlike the classic IPO option, this created greater uncertainty in terms of what demand for shares would ultimately turn out to be. Indeed, demand for the service's shares was not as strong as previously expected.

Robinhood reported its preliminary results for the second quarter in a previously submitted prospectus: the company expects revenues to rise by at least 124% to $546m, while it reported a loss of $487m to $537m, although it managed to break even last year. Robinhood's user base has grown significantly over the past year, reaching 22.5 million in the second quarter.

At the end of January, the app was at the centre of a scandal when it restricted transactions in shares of GameStop and several other companies that Reddit users were buying up. Now many Reddit users who remembered the situation have written posts urging them not to buy Robinhood stock. "Stay away from them!" – Reddit users wrote about the service's IPO.