Robinhood’s (HOOD) IPO was the culmination of the retail investor theme that’s dominated 2021. The popular investing platform has 22.5 million users, but the first day on the public markets saw far fewer buyers than normal.
According to securities research firm Vanda Track, retail investors net bought $18.85 million worth of the company’s stock on day one of trading. Despite Robinhood’s relationship to this investor class, it isn’t 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. “Didi, for instance, saw retail investors buy $69 million on its debut and Coinbase took up $57.35 million only a couple of months ago.”
The reason is likely due to the company’s unique approach to allocate a significant number of shares for its retail investors to buy before the stock began trading. Robinhood planned to allocate between 20% and 35% of its approximately 55 million shares to its own customers via its app.
The company didn’t say what that final number was, but pointed Yahoo Finance to reports from other outlets suggesting between 20% and 25% — the low end of the expected range.
If it’s somewhere in the middle, say at 22.5% of the 55 million shares offered, then that would be $470 million, making Robinhood’s stock still very popular with retail investors, even if it’s on the low end of expectations.
On Thursday shares fell more than 8% from the opening price of $38 to just under $35, perhaps because many of the retail investors who would have otherwise wanted to buy already had access if they wanted — and other investors wanted to take advantage of the shorter lockup period to liquidate their positions.
Other investors, like Cathie Wood, bought 1.3 million shares.
There were other earlier indications interest in the IPO would be less than the company hoped: Robinhood’s stock was priced at $38, at the lower end of the range it sought, up to $42.
Though it isn’t that unusual for shares of a company to fall in its first day of trading, the past two years have seen solid IPO pops; Airbnb (ABNB) surged 113% on its market debut. According to Nasdaq data, around a third of IPOs fall on their first day, but so far this year the average IPO pop is 40.5%.
Every circumstance is, of course, individual, and a reason for the tepid first day performance could be simply related to doubts about the company — or its valuation. A $38 stock price for Robinhood means a $32 billion value for the company, which the market seems to believe is too high. As a “tech company” and Silicon Valley upstart rather than a more traditional Wall Street-esque firm, it might have momentum behind it, but it makes less money than its competitors, and there’s no guarantee that the incredible growth in 2020 and 2021 will continue.
Clarification 7/31: This article and headline have been updated to clarify the pre-IPO retail buyers and the day one retail buyers.
Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumer issues, personal finance, retail, airlines, and more. Follow him on Twitter @ewolffmann.
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