Robinhood investors may have the last laugh after lackluster IPO

Robinhood investors may have the last laugh after lackluster IPO

Posted: Aug 10, 2021 2:20 PM
Updated: Aug 10, 2021 2:21 PM

Robinhood's Wall Street debut was tepid, just like Facebook's initial public offering more than nine years ago. But despite the lackluster start, Robinhood has roared back to life in the past week. Can it continue to climb and eventually become the Facebook of financial services?

It's way too soon to make that call. But notably, shares of Robinhood debuted at $38 — the same price as Facebook in its May 2012 IPO. Today Facebook is trading at nearly $361.

Robinhood has certainly had a rollercoaster ride so far: The stock tumbled 8% on its first day and fell as low as $33.25 the second day. But it's since roared back up to more than 40% above the IPO price and is now trading around $54, even briefly hitting a high of $85 last week.

It's why some observers are labeling Robinhood a so-called meme stock, even though many detractors on Reddit have bashed the trading platform for a variety of reasons including its temporary ban on customers buying GameStop stock earlier this year.

"The platform that powered the meme stock movement has itself become a meme stock — sometimes to Robinood's benefit and sometimes to its detriment," said Jonathan Anastas, chairman of Alpha Esports Tech, a mobile gaming firm.

So much for the Reddit army of "apes" bringing Robinhood to its knees? Perhaps. The company has been credited with — and also criticized for — helping turn investing into something like a game. But Anastas argues Robinhood is simply following the money.

"They appeal to a trader demographic that is focused more on emotion and momentum," Anastas said. "Robinhood is not valued on fundamentals."

Already on the hunt for acquisitions

Still, Robinhood is now a publicly traded company with a market valuation north of $45 billion and it's looking to grow its business quickly — just like Facebook did before it.

The platform announced Tuesday that it is buying Say Technologies, an online shareholder communications platform geared towards individual investors, for $140 million in cash.

"Like Robinhood, Say was built on the belief that everyone should have the same access to the financial markets as Wall Street insiders," Aparna Chennapragrada, Robinhood's chief product officer, wrote in a blog post.

"We share a common goal of eliminating the barriers that keep people from participating in our financial system," she added.

The fact that Robinhood is looking to make an acquisition so soon after its IPO is also similar to a big deal Facebook pulled off back in 2012, just before it went public: Facebook bought Instagram for $1 billion, a deal that some felt was too pricey at the time.

Facebook, like Robinhood, also struggled out of the gate. In fact, it was an even bigger IPO flop as shares plunged about 50% below their IPO price in the first few months of trading before bottoming out.

But CEO Mark Zuckerberg wound up having the last laugh. The Instagram acquisition helped Facebook become a bigger player in mobile and allowed it to attract even more of the young users advertisers covet. Nine years after its "failed" IPO, Facebook is now worth more than $1 trillion.

Plenty of competition in fintech and from Wall Street

It's hardly a given, however, that Robinhood is on track for a similar surge by 2030. Robinhood CEO Vlad Tenev, like Zuckerberg, will need to stay on top of market trends to get even bigger.

"Robinhood has had a lot of naysayers but they've amassed millions of account holders and the marching orders are clear," said Michael Kamerman, CEO of Skilling, an online brokerage firm. "I think Vlad wants to attract even higher net worth clients."

Robinhood will also need to fend off a large swath of competition over the next decade.

Rival online trading firms ae gunning for Robinhood, including Webull and eToro, which is in the process of merging with a special purpose acquisition company (SPAC) so it too can go public.

Meanwhile financial giants Charles Schwab and Morgan Stanley are courting retail traders more aggressively too, thanks to their respective acquisitions of online brokers TD Ameritrade and E-Trade.

With that in mind, Robinhood could also one day wind up as a juicy takeover target for a larger financial firm that would probably love to get access to Robinhood's younger customer base.

"Wealth has moved from boomers and Gen X to millennials and Gen Z," Anasta said. "Younger investors have different preferences."

The-CNN-Wire
™ & © 2021 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.

Terre Haute
Cloudy
53° wxIcon
Hi: 57° Lo: 52°
Feels Like: 53°
Robinson
Cloudy
52° wxIcon
Hi: 57° Lo: 51°
Feels Like: 52°
Indianapolis
Cloudy
53° wxIcon
Hi: 54° Lo: 50°
Feels Like: 53°
Rockville
Cloudy
52° wxIcon
Hi: 56° Lo: 51°
Feels Like: 52°
Casey
Cloudy
51° wxIcon
Hi: 55° Lo: 51°
Feels Like: 51°
Brazil
Cloudy
53° wxIcon
Hi: 56° Lo: 51°
Feels Like: 53°
Marshall
Cloudy
53° wxIcon
Hi: 56° Lo: 50°
Feels Like: 53°
Cloudy and Cool
WTHI Planner
WTHI Temps
WTHI Radar

WTHI Events

 

Illinois Coronavirus Cases

(Widget updates once daily at 7 p.m. CT)

Cases: 1677939

Reported Deaths: 27996
CountyCasesDeaths
Cook63537311208
DuPage1083221378
Will913951127
Lake801071088
Kane68469872
Winnebago41117561
Madison40130597
St. Clair36293598
McHenry34762330
Champaign27034197
Peoria26956368
Sangamon25767287
McLean23033219
Tazewell20666331
Rock Island18872361
Kankakee17943249
Kendall16221113
Macon15321251
LaSalle15052287
Vermilion14418201
Adams13167152
DeKalb12169134
Williamson12069174
Whiteside8307183
Jackson809394
Boone794883
Coles7895124
Ogle757989
Grundy739486
Franklin7335115
Knox7297169
Clinton7129102
Macoupin6965106
Marion6929144
Henry664277
Effingham6618100
Jefferson6561143
Livingston598498
Stephenson585493
Woodford577192
Randolph5560100
Christian535682
Fulton527376
Monroe5252103
Morgan5079100
Logan495374
Montgomery491881
Lee478960
Bureau443191
Saline434469
Perry433775
Fayette431264
Iroquois421777
McDonough374161
Shelby348748
Jersey336253
Lawrence333433
Crawford333230
Douglas328137
Union307248
Wayne304363
Richland280057
White280033
Hancock274035
Clark266540
Cass266330
Pike265258
Edgar260149
Clay259254
Bond257425
Ford245659
Warren244266
Carroll236838
Moultrie235733
Johnson228832
Wabash217219
Jo Daviess216129
Massac215850
Mason214452
Washington212528
De Witt206230
Greene205340
Mercer204736
Piatt202314
Cumberland190226
Menard172313
Jasper161321
Marshall141521
Hamilton134122
Schuyler108310
Brown106610
Edwards104218
Pulaski104212
Stark81628
Gallatin7889
Alexander72512
Scott7126
Henderson70614
Calhoun6932
Hardin60616
Putnam5654
Pope5536
Unassigned1622433
Out of IL130

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Cases: 1005797

Reported Deaths: 16449
CountyCasesDeaths
Marion1353572119
Lake663011164
Allen57820801
Hamilton46296464
St. Joseph44311613
Elkhart35888509
Vanderburgh32214480
Tippecanoe27898258
Johnson25056445
Hendricks23854359
Porter22890365
Madison18724409
Clark18540252
Vigo17449303
Monroe15242199
LaPorte15124250
Delaware15043261
Howard14719289
Kosciusko12285147
Hancock11709175
Bartholomew11602180
Warrick11287189
Floyd11082215
Wayne10965253
Grant10051220
Morgan9457176
Boone8913116
Dubois8263131
Dearborn820893
Henry8200152
Noble8017106
Marshall7916135
Cass7528121
Lawrence7447171
Shelby7176119
Jackson697289
Gibson6584115
Harrison647591
Knox6418106
Huntington6385100
DeKalb630699
Montgomery6252110
Miami592298
Putnam580078
Clinton574971
Whitley564255
Steuben560676
Wabash5324104
Jasper529879
Jefferson510297
Ripley499886
Adams481576
Daviess4670114
Scott438574
Greene424496
Wells423088
Clay422060
White418164
Decatur4164102
Fayette406187
Jennings386661
Posey376644
LaGrange357678
Washington357651
Randolph344499
Spencer339543
Fountain334760
Sullivan328652
Starke316470
Owen314170
Fulton309467
Orange293564
Jay284145
Franklin265443
Perry265352
Rush261332
Carroll261133
Vermillion257754
Parke231126
Pike228843
Tipton227559
Blackford192642
Pulaski183457
Crawford159223
Newton157848
Benton150217
Brown146147
Martin138219
Switzerland134911
Warren121016
Union107016
Ohio84513
Unassigned0540