Robinhood Makes Unconventional Yet Muted Stock Market Debut

American stock and crypto trading platform Robinhood made its stock market debut, although the unconventional floatation was a muted one. The brokerage, which aims to “democratise finance for all”, saw more than 49m shares worth $1.8bn solid in the first half an hour of trading. However, the shares then fell by up to 12%.

The opening price was $38 per share, with the shares first offered on the NASDAQ to the public markets at the bottom of its target range for buyers. The company did gain some ground back after the dip, climbing back to $36, down around 5% overall.

It is one of the most valuable US companies to have gone public this year, worth a total of $23bn. Robinhood’s debut was an unconventional one, as the company put aside between 20% and 35% of its shares for its customers.

The online broker launched in 2013 and quickly became extremely popular with new generation traders largely due to its easy-to-use app and zero commission policy on stocks and ETFs. The company then expanded into the crypto market.

Market reaction

“The business has been a juggernaut. They’ve got a great platform they can build off of,” said David Weild, former vice chairman of the Nasdaq and current chief executive of investment bank Weild & Co.

Kathleen Smith, co-founder of bank Renaissance Capital said that the app’s success is due to it being “exciting to trade on their app, and the other brokers are going to have to catch up”.

“They already showed when they started that out, offering commission free trading, it didn’t take too long for the rest of the competitors to follow suit – so they have been a leader in disrupting the space,” she added.

It saw a huge surge in users during the pandemic, with the number of accounts doubling to 31 million since January. However, it generated controversy this year by suspending trading on certain stocks following a confrontation between retail investors and Wall Street hedge funds.

Retail investors from the Reddit group Wallstreetbets initiated a mass buying of stocks like Gamestop and AMC after hedge funds had been shorting the stocks. This saw the stocks rise rapidly, with Robinhood suspending retail trading due to the consequent financial strains, a move that was widely slammed by the trading community.

The company was fined $70m by a US regulatory body last month due to it harming users through “false and misleading” communications. This followed a $65 million fine paid to the US Securities and Exchange Commission in 2020, again for misleading customers.

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