Robinhood slides below IPO price in debut

Robinhood Markets Inc. dropped below its initial public offering price in its trading debut 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 per cent in its trading debut Thursday before climbing back closer to — but still below — the price in its $2.1-billion IPO, in which the shares were sold at the bottom of a marketed range.

The shares, which opened at the US$38 offer price, closed at US$34.82 in New York, giving the company a market value of about US$30 billion. Accounting for employee stock options and similar holdings, Robinhood's fully diluted value is closer to US$31 billion, but still short of the more than $36 billion 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 per cent to 25 per cent of the deal to such individual investors, after earlier setting aside as much as 35 per cent 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 fuel trading of stocks such as Gamestop Corp. and AMC Entertainment Holdings Inc., urging 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 US$38 each after marketing them for US$38 to US$42.

“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 US$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 co-founder and chief executive officer Vlad Tenev said in a Bloomberg Television interview that he's striving for a “large portion” of the company's customers to be long-term investors.

“It's a surreal moment,” Tenev, 34, said shortly before Robinhood shares began trading on Nasdaq. “We're not thinking about anything that happens in the market, especially in the short term.”

Tenev and co-founder Baiju Bhatt officially became billionaires with the IPO.

Tenev's holdings were valued at US$2.4 billion, according to the Bloomberg Billionaires Index.

Bhatt, who shared the CEO duties until last year, is worth US$2.8 billion.