Robinhood Markets Inc. ended its first day as a public company 8.4% below its initial public offering price after failing to win over some of the very retail investors it's courting for long-term growth.
The online trading platform focused on making investors out of millennials slid as much as 12% in its trading debut Thursday after a $2.1 billion IPO priced at the bottom of a marketed range.
The shares, which opened at the $38 offer price, closed at $34.82 in New York, giving the company a market value of $29 billion. Accounting for employee stock options and similar holdings, Robinhood's fully diluted value rises to more than $30 billion, but still short of the $36 billion-plus valuation it would have had at the top end of its price range.
The trading app made famous in this year's meme stock frenzy had allocated an unusually large portion of its IPO shares to retail stock buyers. It ended up selling around 20% to 25% of the deal to such individual investors, after earlier setting aside as much as 35% of the offering for them, according to a person with knowledge of the matter.
The IPO was also greeted by postings on Reddit, the platform that helped drive trading of stocks such as GameStop Corp. and AMC Entertainment Holdings Inc., that urged would-be investors to simply avoid Robinhood's IPO.
"It looks like nobody wants to touch it," said Max Gokhman, head of asset allocation at Pacific Life Fund Advisors. Robinhood sold 55 million shares Wednesday for $38 each after marketing them for $38 to $42.
'Hole' in the Floor
"Without any bids, there's no floor beyond what the underwriters are willing to do, but when you release a third to retail and they say 'No thanks' you put a hole in that floor," Gokhman said. "To be honest, when they priced at $38, I thought a flop was likely, but I didn't expect it to be this bad."
The failure to deliver a first-day pop craved by IPO investors may signal doubt about Robinhood's promise to "democratize" and expand access to capital markets.
Robinhood debuted in a crowded but diminished week in the capital markets, as a record-setting year of U.S. listings is losing momentum. Some 33 companies including blank-check firms had been slated to raise more than $11.6 billion on U.S. exchanges, according to data compiled by Bloomberg.
IPOs Pulled
The second-biggest IPO of the bunch, what was planned to be a listing of up to $1.8 billion by car-battery maker Clarios International Inc., was postponed indefinitely. Preston Hollow Community Capital Inc., a provider of specialized financing solutions, also delayed its IPO, which had been set for Thursday, Bloomberg News reported.
An IPO by fruit and vegetable producer and distributor Dole Plc, earlier planned for Tuesday, was cut back to a target of up to $515 million and moved to later Thursday.
The slowdown follows a record-setting year in which more than $231 billion was raised by 695 firms, including special purposes acquisitions companies, in IPOs on U.S. exchanges, the data show. Excluding those SPACs and closed-end funds, Robinhood's IPO was the sixth-largest of the year.
Of the seven listings that raised $2 billion or more, only Robinhood and AppLovin Corp. closed below their offer prices on the first trading day. Only three of the seven, though, are still trading above their offer price.
