Robinhood is a trading platform that aims to democratize finance for all. It was founded in 2013 by Vlad Tenev and Baiju Bhatt. Their mission is to enable everyone to invest, not just wealthy individuals and institutions. Robinhood originated as a stock and ETF trading platform. However, the company has evolved further, adding different products and services to their app. In January of 2018, Robinhood introduced cryptocurrency trading to the app. The company now has support for Bitcoin, Dogecoin, Ethereum, and Litecoin. In December of 2018, Robinhood added the “Cash Management” feature to the app, which includes a built-in debit card and checking/savings accounts. These additional services make Robinhood quite an attractive trading platform as opposed to its competitors. Robinhood became such a powerhouse in the brokerage industry with its commission-free trading that in October 2019, several major brokerages like Charles Schwab and E-Trade announced that they were eliminating trading fees in order to stay in competition with Robinhood.
Robinhood went public on July 29, 2021. The stock went public at a price of $38, valuing the company at $32 billion. Goldman Sachs and JPMorgan Chase were the main underwriters of the deal. Within 3 hours of trading, the price dropped 9.42% to $34.42. The stock price has since risen, but the initial drop signaled the hesitation that investors felt for Robinhood. This perhaps came from the recent lack of stability from the retail trading app. In January, during the Gamestop frenzy, Robinhood was forced to block traders from trading any more shares of GME because they had run out of money as collateral. In addition, outages have occurred on the app during crucial moments in trading.
Robinhood did not stay down for long. On the second day of trading, the stock grew 0.94% from a price of $34.82 to $35.15. In the next two days of trading, Robinhood shot up to a whopping high of $70.39, an 85.23% increase from its IPO price of $38. This jump was most likely attributed to investors realizing the long term advantages of Robinhood as a company. Its massive growth during the pandemic, the various services it offers (like crypto trading and cash management), and its 22 million users all came together to offer investors a very enticing stock. However, the very next day, Robinhood plummeted 27.58% from $70.39 to $50.97. This drop came from the news that early investors could sell their shares. As a result, early investors sold almost 100 million shares, which caused the drop.
A Unique IPO
Robinhood went in a different direction than most companies when they decided to go public. Following their power-to-the-people values, Robinhood decided to give 25% of its IPO shares to Robinhood users, who are regular retail investors. Using its IPO access feature, Robinhood customers were enabled to buy shares within the app.
Robinhood’s stock has been quite fickle since its IPO, and only time will tell how investors truly feel about the company.