After much anticipation in the weeks and months after filing for its IPO on March 23rd Robinhood Markets finally started trading yesterday, pricing at $38 on its debut, at the lower end of its price range.

In doing so the company raised $2.1bn in the process, valuing the company at $32bn give or take. The lower price appears to suggest that there was some reluctance on the part of some investors to get involved too early.

This “kick the tyres” approach appears to suggest some caution, in the wake of the initial enthusiasm around the Coinbase Global direct listing, which saw the shares surge before sliding back.

This caution certainly appears justified if today’s debut is any guide as the shares slid 8%, making history as the worst debut ever for an IPO of its size.

It would appear that even though the company intends to reserve up to 35% of its Class A shares to its customers who have driven a lot of the growth in the business over the last 12 months, a lot of the retail cohort simply weren’t interested in large enough numbers to buy the shares.

The reality is $38 isn’t that cheap, and while the app has spawned a renaissance of interest in the stock market amongst a younger cohort of traders determined to take on the Wall Street giants with varying degrees of success, it may well have come a little too late given the recent volatility across markets.

At its last set of numbers, the company posted a loss of $1.4bn in the first three months of this year, largely because of the $3.4bn of new debt raised in February, which it used in order to ensure the business met deposit thresholds required by the various clearing houses that handle the trading orders on its platform.

The company says it expects to see revenues well in excess of 2020 this year, after seeing Q1 revenues of over $500m.

Robinhood’s monthly active users have more than doubled in the past 12 months, rising to 17.7m during Q1 of this year, and up to 22.5m towards the end of Q2, while revenues have risen from $277.5m back in 2019 to just below $1bn in 2020.

It also does a lot of business in crypto which has seen almost 18m people use the Robinhood app with $81bn in assets under management.

There is a lot of regulatory concern surrounding the company, which may well have seen some reticence on the part of some investors. Some have suggested that it could have been overpriced, however so have a lot of other IPOs which have much worse finances. That hasn’t stopped them trading higher. It could just be IPO fatigue, because there has been a lot this year.  

Time will tell whether the first day decline turns into something bigger, however it’s not an auspicious start, particularly given Coinbase Global’s recent experience. The shares could fall further if the market decides to test the appetite of buyers further down.   

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