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Summary
- The share price of Robinhood Markets Inc on its first day of trading closed at US$34.82, which is 8.36% less than the Company’s initial public offering price of US$38.00.
- Robinhood Market Inc shares are trading on Nasdaq under the ticker symbol HOOD.
- After the Company’s NASDAQ debut on Thursday, it has a market value of US$29 billion after it closed at US$34.82 in New York.
The share price of Robinhood Markets Inc on its first day of trading closed at US$34.82, which is 8.36% less than the company’s initial public offering (IPO) price of US$38.00. After the Company’s NASDAQ debut on Thursday, it has a market value of US$29 billion after it closed at US$34.82 in New York.
Robinhood’s poor performance on the first day, which was below the expectations of the IPO investors, may raise doubts about the Company’s promise to “democratise” and expand access to capital markets.
On Wednesday, Robinhood Market Inc, which is popularly known for providing commission-free trades in stocks via an app among retail investors, sold its shares in its IPO at US$38 per piece. The fee-free investing application raised almost US$2 billion after it sold its 52.4 million shares. The amount thus raised was far below what the online brokerage had expected as Robinhood had sought a valuation of US$35 billion in its initial public offering.
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What boosted Robinhood’s business perspective?
The Coronavirus pandemic proved to be a blessing for Robinhood from business perspective as its easy-to-use interface attracted the homebound young investors to resort to online trading to make money and keep them occupied. Over the past one year, its active users have increased from 8.6 million to 17.7 million.
In its July 1 public filing, Robinhood made public its financials for the first time. In its public disclosure, the Company revealed that it generated a net income of US$7 million last year against a loss of US$107 million in the year 2019.
The Company’s top shareholders include - New Enterprise Associates, Venture firms DST Global, Ribbit Capital, and Index Ventures. Each shareholder owns over 5% of its stock leading into the offering. The two investment banks leading Robinhood’s IPO are Goldman Sachs Group Inc. and JPMorgan Chase & Co. Robinhood Market Inc. Shares are trading on Nasdaq under the ticker symbol HOOD.
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What are the major controversies surrounding the online brokerage?
Lawmakers and regulatory bodies in the country have raised suspicion on the increasing popularity of online brokerage. They are increasingly demanding scrutiny against Robinhood and others pertaining to the same industry for alleged unfair practices in the stocks trade. Last month, the Financial Industry Regulatory Authority (FINRA) had levied a fine of nearly US$70 million on Robinhood, a record for the watchdog. FINRA had accused Robinhood of misleading its customers regarding margin trading. The claims which the Company has neither admitted nor denied.
The Company had also stated that it is likely to pay US$30 million as part of the settlement with the New York State Department of Financial Services (NYDFS) over accusations of violating anti-money laundering rules.
