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Robinhood Prices IPO at Bottom of Marketed Range

Stock MarketsJul 29, 2021 08:20
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2/2 © Bloomberg. The Robinhood logo on a laptop computer arranged in the Brooklyn borough of New York, U.S., on Saturday, Dec. 19, 2020. Robinhood Markets will pay $65 million to settle allegations that it failed to properly inform clients it sold their stock orders to high-frequency traders and other firms, putting a major compliance headache behind the brokerage even as new ones emerge. Photographer: Gabby Jones/Bloomberg 2/2

(Bloomberg) -- Robinhood Markets Inc (NASDAQ:HOOD) will start trading later on Thursday after pricing its initial public offering at the low end of its range, in what was a muted start for one of the year’s most highly anticipated listings.

The price indicates investors weren’t clamoring to buy Robinhood’s stock the way they had with some of the year’s hottest offerings. Still, a weaker price in the IPO could allow more room for the “first-day pop” craved by investors when the stock opens.

A big pop out of the gate could benefit the Robinhood users that took advantage of the company’s move to open up its IPO to retail investors. It reserved up to 35% of its IPO for its customers.

The pricing seems to have spooked at least one other large IPO that had been in investor meetings. Car battery maker Clarios International Inc., pulled its $1.8 billion listing after the Robinhood pricing late Wednesday, Bloomberg News reported.

Robinhood was still the seventh-biggest IPO on a U.S. exchange this year. The trading app company and some of its investors sold 55 million shares Wednesday for $38 each to raise $2.1 billion, according to a statement. Shares of the company at the center of this year’s meme stock frenzy had been offered for $38 to $42 each.

The company has a market value at the IPO price of just under $32 billion based on the outstanding shares listed in its filings. Accounting for employee stock options and similar holdings, Robinhood’s fully diluted value would be closer to $33 billion. That falls short of the $36 billion that it would have had at the top end of its price range.

Read More: The Robinhood Model: QuickTake

Busy Summer

Goldman Sachs Group Inc. and JPMorgan Chase & Co. are leading the IPO. The shares set to trade on the Nasdaq Stock Market under the symbol HOOD.

It joins a busy summer for IPOs. Listings since Jan. 1 have already reached an all-time record with 688 companies raising a combined total of more than $228 billion, according to data compiled by Bloomberg.

As a publicly traded brokerage, Robinhood will join the ranks of Coinbase Global Inc. (NASDAQ:COIN), a cryptocurrency trading platform that debuted this year and is currently worth $50 billion, and industry heavyweight Charles Schwab (NYSE:SCHW) Corp., which bought competitor TD Ameritrade last year and has a market value of $128 billion.

Robinhood’s co-founders, Chief Executive Officer Vlad Tenev and Chief Creative Officer Baiju Bhatt, will together control most of the shareholder voting power in the company, according to its filings with the U.S. Securities and Exchange Commission.

Index Ventures, NEA

The company’s top shareholders are venture firms DST Global, Index Ventures, New Enterprise Associates and Ribbit Capital. Each group owns more than 5% of its stock leading into the offering.

Salesforce Ventures, the investment arm of Salesforce.com Inc (NYSE:CRM)., had expressed interest in purchasing up to $150 million of the shares at the IPO price, according to Robinhood’s filings.

Robinhood caught on during the coronavirus pandemic as homebound young people turned to online trading to pass the time and make money. Its monthly active users have more than doubled in the past year, with 17.7 million as of the first quarter, up from 8.6 million in the same period in 2020.

The Menlo Park, California-based company had said it would reserve 20% to 35% of its Class A shares for its customers.

‘Gamification’

Robinhood’s increased popularity has led to scrutiny from politicians and regulators, who are focused on the so-called gamification of trading and its role in the meme-stock phenomenon. At the height of the volatile late January frenzy over stocks like GameStop Corp (NYSE:GME)., the company had to raise billions of dollars from its backers.

It disclosed its financials for the first time in its July 1 public filing, which showed the company generated net income of $7.45 million on net revenue of $959 million in 2020, compared with a loss of $107 million on $278 million the previous year.

(Updates with changes starting in the first paragraph)

©2021 Bloomberg L.P.

Robinhood Prices IPO at Bottom of Marketed Range
 

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