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Robinhood's Disappointing IPO Debut

Robinhood's Disappointing IPO Debut
August 2, 2021

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Robinhood's public coming out was meant to be a full-circle moment for the free-trading app seeking to democratize investment trading. As we saw in its Thursday IPO, however, the company had the worst debut of an IPO of its size, with an 8.4% decrease on its first day.  Still, the company raised $2.1BN and created a flurry of interest, from seasoned investors to amateur meme-stock enthusiasts. For comparison, Uber Technologies had a 7.6% decrease on its first day of trading back in May 2019. Since then, Uber's stock has fluctuated from a low of $21.33 to a high of $60.63 before settling today at $44.04, a slight uptick from its starting price of $41.57.

What they do, they do well. 

The company's popularity is due in large part to its free access for investors, enabling ease of adoption for new users. Robinhood's revenue comes from payment for order flow, which funnels investors' money into big trading firms and returns payments back to the business. Already in 2021, the company has nearly quadrupled its revenue from the same period last year and attracted a solid 22.5MM investors.

Not everyone is a fan

Some regulators have criticized the system of payment for order flow but forcing a switch to a commission-based model is reportedly difficult to enact. The stakes of regulation are high for the business, with 81% of revenue derived via payment for order flow. Last week, ahead of the IPO, the Fed seized the phone of Robinhood's CEO, Vlad Tenev, in connection with the ongoing investigation into the company's handling of meme-stock trading earlier this year, when the app temporarily shut down trading of several stocks (including Gamestop, AMC, and others), a move considered a violation of investor ability to participate in a free market and to make a profit. Congresswoman AOC and other legislators sided with these investors and called for an inquiry.  This latest inquiry comes after the company was fined a staggering $70 million for "systemic" failures as well as questions around whether the CEO is properly registered with FINRA as an investment trader.

Retail Investors' Final Word


Speculation about regulation may ultimately pale in comparison to the opinion spread among the app's millions of retail traders, many of them teenagers, comparing notes on Reddit. NPR reported that many of these users are on the fence about the stock, while some are enthusiastic about the democratizing principles the company espouses, and yet others are convinced that like many popular trends in youth culture, the hype may already have passed.

This week’s  IPOs

Cadre: Real Estate Investment Marketplace

IPO: CDRE

Expected Share Price: $16-19

Shares: 7.15MM

Context Therapeutics: Pharmaceuticals

IPO: CNTX

Expected Share Price: $12-14

Shares: 1.5MM 

European Wax Center: Spa Franchise

IPO: EWCZ

Expected Share Price: $15-18

Shares: 10.6MM

Since last week, PrivCo has added:
1120 Companies | 134 Funding Activities | 76 M&A Deals

Funding & Deal Highlights:
 

Coralogix raises $55MM from Greenfield Partners
Artificial Intelligence • Round C • San Francisco, CA


ConverseNow Technologies raises $15MM from Craft Ventures 
Voice AI • Round A • Austin, TX


Homebase raises $71MM from GGV Capital 
HR Tech • Round C • San Francisco, CA


My Lasting Legacy raises $19MM from Volition Capital 
Video Software • Round B • Dallas, TX


Exo Imaging raises $220MM from RA Capital Management 
Medical Devices • Round C • Redwood City, CA


SolCyber raises $20MM from ForgePoint Capital 
Cyber Security • Round A • Dallas, TX


MedRhythms raises $25MM from Advantage Capital Partners 
Medical Devices • Round B • Portland, ME


Spot Insurance raises $15MM from GreatPoint Ventures 
Insurtech • Seed • Austin, TX


Vacasa merges with TPG Pace Solutions in $4.5BN deal
Vacation Rental Management • Merger • Portland, OR


FLSmidth & Co. acquires ThyssenKrupp AG's Mining Unit
Industrial Machinery • Acquisition, • Copenhagen, Denmark


TSG Consumer Partners acquires Rough Country Suspension Systems
Auto Parts • Acquisition • Dyersburg, TN


Fosun International acquires Evil Geniuses for $250MM
Advertising • Acquisition • Redmond, WA


Partners Group acquires Reedy Industries 
HVAC • Acquisition • Deerfield, IL
 

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