Shares in popular trading platform Robinhood slumped below their offer price immediately after their Nasdaq debut on Thursday, in a lacklustre start to one of this year’s most anticipated IPOs.
In what signalled slack investor demand for the online brokerage – which exploded in popularity during the pandemic amid retail investor appetite – shares fell as much as 8 per cent moments after listing.
Shares opened at $38 each, in line with the the offer price it had set on Wednesday, at the bottom end of its $38 to $42 range.
But they soon took a dive, falling as low as $35 before regaining some ground to trade at $36.07 – 5 per cent below the set price.
The brokerage’s initial performance on listing compared with an average share price hike of 39 per cent in US IPOs this year, according to data from Dealogic.
Robinhood sold 55m shares and raised $2.1bn. At the opening price of $38, the platform’s valuation would be around $31.75bn.
Robinhood, which was founded 2013, surged in popularity amid a frenzy of trading in so-called meme stocks and found itself at the centre of a meme stock craze that roiled global markets in the last 18 months.
It now has an estimated 22.5m funded accounts, according to its latest prospectus.
However, it also came under fire after it was forced to curb trading of stocks such as GameStop and was forced to raise $3.4bn in emergency funds to help shore up its finances.
In an unusual move, Robinhood reserved between 25 and 30 per cent of its IPO shares for retail investors who are users of its app – which it warned could spark volatile trading upon listing.
The downward pressure on Robinhood’s stock on the first day of trading was due to “a combination of a large allocation to retail investors, allowing employees to sell, and negative sentiment from outspoken customers,” said Robert Le, senior analyst at PitchBook.
“A poor IPO performance will likely limit companies from issuing large allocations of shares to retail investors in future IPOs.
“We believe the company will close just under the $30 billion valuation mark, which would bring its valuation multiple closer to its recently public fintech peers like Coinbase and Affirm,” Le added.