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Robinhood Stock Closes Rocky First Week of Trading Down 7.5%

DATE POSTED:July 31, 2021

Robinhood might have driven the frenzy around "meme stocks" like GameStop, AMC, and meme-coin Dogecoin, but investors were less interested in buying shares of the popular brokerage app itself.  

Robinhood's IPO got off to an underwhelming start on Thursday, when HOOD shares closed their first day of trading at $34.82, an 8.4% drop from their opening price of $38. On Friday, HOOD clawed back just one percent to close the week at $35.15, down 7.5% from the IPO opening price.

The closing price for the week concludes an ignominious public debut for the company that was central to the retail investor revolution of the past year.

Robinhood had the single worst debut for an IPO of its size, underperforming Uber, Pepsi and MF Global on its opening day. Back in 2019, Uber closed its first day with shares down 7.6% and, in 2007, MF Global closed its debut session 8.2% down. 

On Wednesday, ahead of the IPO, Robinhood and some of its existing investors sold 55 million shares at prices between $38 and $42. For the IPO, shares were priced at the bottom of that range. The Wall Street Journal blames a large part of Robinhood’s chilly debut on the company’s retail-heavy “democratizing” strategy. 

Before the IPO, Robinhood had earmarked 35% of shares for Robinhood’s existing customers. In an IPO like this, that number is usually under 10%. This allocation fell to 20-25% when Robinhood officially went public, according to WSJ, as many of the app’s users decided to pass on the company’s offer.

Robinhood also waived the usual six-month lockup for employees, allowing them to sell some of their shares right away; clearly, some did. 

The app's disappointing debut by no means determines its future as a public company. With 18 million funded accounts, 9.5 million of which traded crypto in the app in the first quarter of this year, Robinhood is still thriving.

Facebook stock also famously struggled in its debut. Look how that turned out.

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.