Robinhood (HOOD) Stock Price and News: IPO Priced at $38, low end of previously guided range

Robinhood (HOOD) Stock Price and News: IPO Priced at $38, low end of previously guided range

Robinhood (HOOD) launches IPO at $38 on NASDAQ today, Thursday, July 29.

HOOD previously guided the IPO launch price at $38-$42.

Robinhood closes at $34.82 in volatile trading.

Update: Robinhood closed at $34.82 in a volatile first day of trading. The stock listed at $38 and was under pressure straight away, bottoming out at $33.38 with the first hour of trading. From here some buyers stepped in, perhaps the greenshoe was activated, and HOOD popped up to $38 once again before falling back again. Failing to retake $38 is a bearish technical sign and the stock took the bait and ran lower. The majority of volume took place at $36 and $34.50.

Robinhood is due to launch on the US stock market today, July 29, and is sure to garner much attention from both retail and institutional investors. Robinhood had previously guided the IPO price to be in the range of $38 to $42 but confirmed on Wednesday that $38 is to be the listing price. Pricing at the lower end of the range is often seen as a sign of reduced investor demand, but it may also be to ensure a successful Initial Public Offering (IPO) with strong follow on support orders meaning strong price appreciation on the first day of trading. The bar has been set so high now for IPOs that anything other than a lift-off is seen as a failure. Seasoned corporate watchers will also be aware that underpricing the issue can leave significant money behind for the founders, so it is a tricky negotiating process.

In this case, Goldman Sachs and JPMorgan are leading the issuance and they along with Robinhood founders and board members have likely decided on the $38 price for a variety of reasons. For sure they will want a successful launch and to avoid any negative publicity that they also suffered from back in the original Gamestop (GME) frenzy. Ever since this, the HOOD IPO has been on the minds of retail traders determined to avoid it, with many commenting on social media on how they would like to see it fail. The Wall Street Journal reported that the pricing of the IPO at the lower end of the range is a decision by Robinhood to help ensure a good first day session.

To recap, Robinhood had to restrict trading in some stocks (along with other brokers it should be noted) in the original meme stock frenzy for GameStop back in January/February. This was likely due to margin increases from its clearing house due to the explosion of trading in certain stocks, most notably GME. This has soured the company’s reputation in the eyes of many retail investors. Despite this, Robinhood (HOOD) has set aside 20-35% of its shares for its app users, mostly retail investors.

Robinhood is an online trading platform with an emphasis on financial markets trading. Through its app, the company allows trading in major US stocks and options, cryptocurrency through its Robinhood Crypto subsidiary, as well as exchange-traded funds (EFTs). The company has revolutionized the online trading space through its ease of use and simple explanation of option-related trading and, probably more importantly, commission-free trading.

Robinhood (HOOD) stock news

Robinhood has been in existence since 2013, having been set up by Standford graduates Vlad Tenev and Baiju Bhatt. The Robinhood app was launched in 2013, but it was not until it launched on the Apple app store in 2014 that it began to gain traction with retail investors. Robinhood was relatively well-known until the 2021 retail trading frenzy cast it into the stratosphere with volumes and users of the Robinhood app exploding. The company struggled to keep up with the explosion in trading in GameStop (GME) shares. The whole saga eventually led to CEO and founder Vlad Tenev testifying before the US Congress on the issue along with several other senior industry representatives.

Robinhood recently said for the three months ended to March 31 that revenue had grown to $522 million, a growth rate of over 300%. The company said that 2020 total revenue was $959 million, an increase of 245% from the previous $278 million for 2019.

Robinhood has 21.3 million monthly active users with an average of $4,500 in their account, according to a report by Reuters. The average balance at Schwab and Interactive Brokers is $250,000.

Robinhood will offer 52.4 million shares for sale with an extra 2.6 million shares to be sold by selling stockholders. After the IPO Vlad Tenev, the founder and CEO, as well as other related entities will hold about 7.9% of shares, according to Reuters. Vlad Tenev will hold more voting power at about 26% with fellow founder Baiju Bhatt holding about 39%. This is common with recent tech IPOs.

Robinhood stock price

Pricing the shares at $38 values Robinhood at $31.8 billion. 55 million shares are being priced at $38 to raise just over $2 billion. There is also a greenshoe option for the underwriters (Goldman and JP) to purchase a follow on 5.5 million shares. So in total, there is the potential to raise $2.29 billion. A greenshoe is a mechanism used in an IPO to ensure an orderly market. It can be used to stabilize prices if they fall below a certain level after the IPO. The underwriters will step in and buy shares to support the price. The aim is for there to be no need to use the greenshoe as it is generally hoped IPOs appreciate on the first day of trading.

The shares will begin trading today, Thursday, July 29, on the Nasdaq under the ticker HOOD.

Robinhood stock makes Nasdaq debut in IPO: Here’s everything to know about HOOD

Robinhood Markets, the zero-fee stock trading platform, has shuffled in and out of public favor in the last year: first as a weapon of revolution for an army of retail investors waging war on Wall Street, and then as a banner of doomed causes that marched the army straight into their graves.

Despite its speckled history, it promises to be one of the biggest and most hyped market debuts of the year, set to kick off trading in a matter of hours. Here’s what to know:

The basics?

Robinhood will debut on the Nasdaq under the ticker HOOD. Shares are priced at $38, the bottom end of its $38 to $42 range, Financial Times reports, and the company is aiming for a valuation of about $32 billion. It’s going public through a traditional initial public offering (IPO) route, as opposed to the direct listings and special purpose acquisition company (SPAC) deals that have been in vogue lately.

Anything noteworthy?

In keeping with its stated mission of democratizing the stock market by lowering the barriers to trading, Robinhood is reserving 20% to 35% of its shares for its own customer base, which CEO Vlad Tenev has said would be among the largest retail investor allocations ever. Historically, IPO shares have been primarily reserved for Wall Street institutions and high-net-worth individuals, who can then buy into the stock before its debut, thus capitalizing on any resulting IPO pop.

What to Expect When Robinhood (HOOD) Starts Trading

Later today, shares in the trading and investing app Robinhood (HOOD) will begin trading on the Nasdaq. This is the most eagerly anticipated offering of the year, for sure, but in many ways may be the most interesting for a long time. So what can traders and investors expect?

There is a pattern that is typically seen in high-profile IPOs. The hype around the release leads to unsatisfied demand for the shares, all but guaranteeing early trading at a significant premium to the offering price. Then, as profits are banked and the realization sets in that maybe all those highly paid investment bankers and fund managers who had input when the offering price was set actually know what they are doing, the stock backs off its initial highs. After that pullback, once all the hoopla fades, pricing goes back to fundamentals and stock in a company with real prospects or existing business bounces back.

A good recent example would be Airbnb (ABNB).

Airbnb Stock 1st 3 Months Post-IPO

ABNB was offered originally at $68 per share. During the first day’s trading, it hit a high of $165, before dropping back over the next few days to a low of $121.50. Then the climb began, and by three months after the stock started trading, it was well over $200.

That pattern is pretty typical for a high-profile launch, and follows a simple logic based on human behavior. However, there are some who doubt this will happen with HOOD. That initial pop on the first day of trading usually comes as a result of interest from retail traders. They are familiar with the company and would have taken stock at the offering price were it available, but the vast majority of shares in most popular IPOs go to institutional traders. That creates retail demand on day one that ensures a pop in the stock and, maybe not coincidentally, a quick, tasty profit for those institutions.

Robinhood is different, which will come as no surprise to anyone familiar with the company.

Their very name is synonymous with the power of the retail trader, so it is only natural that they would try to support their supporters in the IPO. As a result, they have allocated a much higher percentage of their shares than usual to individual investors and users of the app. That is a great move, and one I hope is followed by more companies going forward, but it does create some uncertainty. If that retail demand for the stock has already been met, will there be enough demand to force the stock higher on day one?

If the past actions of Robinhood traders are anything to go by, there certainly will be. They have shown in the past that when retail traders unite, they can be a powerful force. They have also shown a propensity for doing their thing with brands and companies they like in other contexts. That is why GameStop (GME), for example, got their attention. So, support for this offering, even after the high retail allocation, looks likely. If the so called Robinhood traders really get their teeth into this one, though, what may not come is the pullback over the next few days.

That is especially true because the offering was set at $38, towards the low end of the expected range, which surprised some. Usually, that would be an indication of lukewarm interest in the offering but given that the market has been a bit wobbly over the last couple of days, that may not necessarily be true here. For one, the idea of the high retail allocation is to allow their people to share in the profits. The company’s anticipated swing back to a loss in Q2 may have also dampened institutional enthusiasm somewhat, but Robinhood has demonstrated that they can make money, having grown revenue over 300% year-on-year in Q1. That kind of growth is both rare and valuable, so it is possible that this time, there will be pent up demand from institutions rather than individuals, limiting the pullback and maybe even keeping HOOD buoyant for a while.

I certainly hope I am right because we all have an interest in this. This is a unique IPO and Robinhood has stood for the little guy since its launch, introducing a whole new generation to trading and investing. If capitalism is to survive and thrive, it has to benefit everyone and not just a select, elite few.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.