Retail investors bought $18.9 million in Robinhood shares during its IPO debut, less than other high-profile launches, data shows

A graph shows how much money retail investors purchased in companies in the first day of trading.
Snap tops a list of net retail purchases on 1st trading days.

  • Individual investors bought $18.85 million in shares of Robinhood during the trading app’s debut on Thursday, Vanda Research said.
  • That’s lower than other major IPO debuts, including this year’s launch of Coinbase.
  • Robinhood ended its first trading session down by 8.4% and has continued its slide on Friday.
  • See more stories on Insider’s business page.

Retail investors bought $18.85 million of Robinhood stock during the trading app’s first day in the public market, lower than other major IPO debuts, according to Vanda Research data released Friday.

Retail investors poured more money into this year’s launches of crypto exchange Coinbase and Chinese ride-hailing app Didi Global. In April, $57.4 million in Coinbase stock was purchased, and in June, that group picked up $69.8 million in Didi stock, said Vanda, whose VandaTrack arm watches activity in 9,000 individual stocks and ETFs in the US.

The $19.7 million of DoorDash shares purchased in the food delivery company’s December 2020 debut was just ahead of retail purchases of Robinhood stock.

Robinhood shares had a rough first session on Thursday, dropping 8.4% to end at $34.82 after being whipsawed. The IPO price of $38 was at the low end of its targeted range of $38 to $42 per share.

Social media app Snap tops the list at $143 million in shares purchased by retail investors, said Vanda. Snap went public in March 2017. Uber was right behind that, at $139.9 million in May 2019 for the ride-hailing app.

Robinhood bucked convention in its IPO by setting aside 35% of its shares for individual investors. The company earlier this year angered many of its customers when it halted buying of GameStop, AMC Entertainment and other meme stocks during a massive rally. Robinhood had pledged to earn back the trust of those customers. The company has more than 18 million accounts and 17.7 million active monthly users.

Among institutional investors, Cathie Wood’s ARK Innovation ETF exchange-traded fund bought nearly 1.3 million shares of Robinhood on Thursday, according to a daily trading report from Ark Investment Management. That logs a $45 million stake in Robinhood at the company’s closing price.

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8 multi-billion IPOs that cemented Andreessen Horowitz’s power

Marc Andreessen Ben Horowtiz Andreessen Horowitz
Marc Andreessen and Ben Horowitz have had several blockbuster exits in the past couple of years.

  • Andreessen Horowitz earned its Silicon Valley power broker status by backing Facebook and Twitter.
  • It’s turned those wins into a decade of multi-billion exits.
  • Here are the firm’s eight biggest IPO exits since 2011.
  • See more stories on Insider’s business page.

A decade after Marc Andreessen declared that software was “eating the world,” his VC firm has notched a succession of multibillion-dollar exits.

Andreessen Horowitz, founded in 2009, hit the ground running early with a few IPOs among its portfolio companies in its first few years: Groupon and Zynga in 2011, and Facebook in 2012. The firm, known as a16z, reportedly bought a stake in Twitter, which went public in 2013, through secondary markets.

But as Crunchbase noted in a recent analysis of Andreessen Horowitz’s performance, the VC firm didn’t have large enough stakes in those companies to merit a mention in SEC filings.

That’s also the case for a couple of more recent public debuts within its portfolio: Airbnb and Roblox. Andreessen Horowitz backed Roblox in 2020 as part of its later-stage portfolio.

But several of its more substantial investments have borne fruit recently. According to Crunchbase, the firm has had stakes of 5% or more in eight companies that have gone public since 2011. All but one have gone public in the last two years.

The VC firm was the largest institutional investor in Coinbase prior to the company’s direct listing in April. Andreessen Horowitz’s stake, based on the company’s recent share performance, is worth around $6 billion.

Here are all the public companies since 2011 in which a16z held at least a 5% stake. For most of the companies, the VC firm got in early.

Company Public debut First a16z investment
Okta April 2017 2010, Series A
Lyft March 2019 2013, Series C
PagerDuty April 2019 2013, Series A
Pinterest April 2019 2011, Series B
Slack June 2019 2010, Series A
Accolade July 2020 2016, Series E
DigitalOcean March 2021 2014, Series A
Coinbase April 2021 2013, Series B

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Why the ‘trillion-dollar’ markets touted by SPAC startups don’t always add up

chamath palihapitiya richard branson virgin galactic ipo
Richard Branson’s Virgin Galactic went public via a SPAC merger.

  • The booming SPAC market has been spooked by the acting SEC director’s recent hints that new rules could be on the way.
  • The financial forecasts used by companies going public through SPACs could come under scrutiny.
  • A close look at the so-called Total Addressable Market estimates used by companies involved in SPACs shows why caution is advised.
  • See more stories on Insider’s business page.

Last week John Coates, the Harvard academic who is acting director of the Securities and Exchange Commission’s division of corporate finance, caused a kerfuffle in the world of SPACs.

In a highly readable (really!) treatise on blank-check companies, as special-purpose acquisition companies are also known, Coates issued a warning to the investment bankers, lawyers, entrepreneurs, part-time board members, and other charlatans exploiting the trend. Plenty could go wrong, he said, when those who raise SPAC funds then buy a company. He ticked off a list of concerns from conflicts of interest to celebrity involvement to the potential ordinary investors being lured by “baseless hype.”

Coates focused on the use of financial projections in SPAC deals. Because a SPAC buying a target technically is a merger, not an IPO, most have assumed it’s okay to ignore IPO rules, which prohibit financial projections that could be used to bamboozle investors. Coates cautioned SPAC sponsors against becoming too comfortable with this loophole-and suggested the SEC might make rules to clarify matters.

The SEC official didn’t give specific examples of “baseless hype,” but he might have mentioned the way companies describe the market opportunity in front of them. SPAC after SPAC, in presentations to investors, describe the “total addressable market” they are attacking. The implication is that even if they have little or no business today their potential is huge.

Like the financial projections that worry the SEC, these market-size estimates – nearly always rosy and often far out into the future – ought to give pause to investors. SPACs tend to buy unproven companies, like flying car manufacturers and space “infrastructure” companies. (If they were proven, the companies likely would go the more respectable IPO route.) Because investors can’t possibly know what these startups might become, the potential market size estimates are important for making an investment decision.

Flying car companies are particularly good at this cheerful prognostication. Three have announced plans to become SPACs so far. Two, Archer Aviation and Lilium, say their market could be as big as $3 trillion by 2040. Both based their guesstimate on the same 2018 Morgan Stanley research report by analyst Adam Jonas. The far-into-the-future estimate applies a kitchen-sink approach to market sizing by including revenue projections for several industries, including airlines, cargo, ride-hailing, and “key accelerants” like batteries, communications equipment, and software.

I asked Morgan Stanley for a copy of the Dec., 2018, Jonas report, “Flying Cars: Investment Implications of Autonomous Urban Air Mobility,” so I could dig into the assumptions Archer and Lilium are relying on. A Morgan Stanley spokeswoman said “we decline at this time, due to this report being outdated.” Good point, though one wonders why it’s good enough for companies about to include average investors as their shareholders.

Joby Aviation, another flying car company has a more modest, but also aggressive estimate of its potential market. It told investors it saw a $500 billion addressable market in the US alone and a global market of “north of $1 trillion.” Joby didn’t cite a date by which this market will appear. But it did source its estimate to another 2018 study, this one by tech consultant Booz, Allen, Hamilton.

That study, prepared for NASA, is available online. A summary notes that the US prognostication is “for a fully unconstrained scenario” and that factors like weather, certification, regulatory hurdles, and public perception could reduce its near-term estimate to 0.5% of the total, or $2.5 billion. As it happens, the BoozAllen consultant who wrote the report, Rohit Goyal, now works in “product intelligence” for Joby, according to his LinkedIn profile. Investors might do well to ask him about the report’s assumptions.

Let’s be clear about something: Making a guess at the total size of a potential market is a valuable exercise for investors. The late Don Valentine, a founder of Sequoia Capital, was famous for paying attention to the size of the market opportunity to the exclusion of all else. But he was making risky venture-capital bets. Lise Buyer, an advisor to companies that go public, and a fund manager, research analyst and VC at various stages of her career, told me it’s “totally legit for investors to ask what’s the biggest the market could be if everything goes right. But I think they will roll their eyes when the numbers get too big.”

Or at least they ought to.

***

In other news:

While I have you, I’d like to recommend a fine book that reflects badly on big business. It’s called “Death in Mud Lick: A Coal Country Fight against the Drug Companies that Delivered Opioid Epidemic”, by the Pulitzer-prize winning West Virginia investigative journalist Eric Eyre.

There are plenty of good books about the opioid scourge, including Beth Macy’s “Dopesick” and the just-out and rapturously reviewed Sackler family takedown “Empires of Pain” by Patrick Radden Keefe. Eyre’s book focuses on the role of the big drug distributors – Cardinal Health, McKesson, and AmerisourceBergen – in pushing pills for years that led to an overdose epidemic. Each of these companies is locked in multi-state litigation to resolve the type of allegations Eyre details. CEOs of each, for what it’s worth, signed the Business Roundtable’s 2019 statement of purpose, which, among other things, promises to “respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.” After reading this book you’ll be hard pressed to judge their actions respectful or sustainable.

I planned to write an entire column on hollow corporate statements and how they relate to the current climate of corporate activism and political awareness. But the lead editorial in the current issue of The Economist published a perfect distillation of what I wanted to say. So instead, I’ll link to it here.

Adam Lashinsky is a Business Insider contributor and former executive editor at Fortune magazine, where he spent 19 years. He is the author of two books: “Inside Apple” (about Apple) and “Wild Ride” (about Uber).

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Robinhood looks to allow users to buy directly into IPOs, report says

Robinhood on cellphone


Robinhood is looking to allow its users to buy directly into initial public offerings, including its own, alongside institutional investors, Reuters first reported.

While the popular trading app – which confidentially filed IPO paperwork on March 23 – could easily implement this for its own debut, it remains to be seen how other companies will react to this move, knowing how limited allocations are to investors during new listings.

Further, Robinhood would still need to get the approval of US regulators and negotiate with companies and their brokerages, sources told Reuters.

Robinhood users and retail traders are currently not able to buy stocks of newly listed companies until they start trading, unlike Wall Street investors. If this initiative succeeds, it will be considered a win for retail traders as shares often trade higher when they debut in what is commonly known as a first-day pop.

The average pop on US listings in 2020 was 36%, according to data provider Dealogic as reported by Reuters.

Sources tell Reuters that the Menlo Park, California-based company plans to allocate a portion of shares on offer in its IPO for all of its 13 million users.

Read more: Cathie Wood says Tesla’s stock is going to $3,000 by 2025. 2 market experts break down whether that’s realistic and the catalysts that might lead the EV maker there.

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Car-rental app Turo aims to list shares publicly in 2021, report says

andre haddad turo ceo
  • Car-rental startup Turo aims to list its shares publicly in 2021 after a strong end to 2020, the company’s CEO told The Wall Street Journal in a report published Friday.
  • Turo allows people to offer their private vehicles for rental, a car-sharing alternative to industry giants such as Hertz or Avis.
  • CEO Andre Haddad isn’t yet sure whether the company will pursue a traditional IPO or an alternative like a blank-check-company merger, according to The Journal.
  • The startup slashed costs and laid-off workers in 2020 to shore up extra cash. Those actions helped the company cut its second-half loss to $7.2 million, down from $46.9 million in the second half of 2019.
  • Visit Business Insider’s homepage for more stories.

Turo – a car-sharing app – plans to publicly list its shares in 2021 following a strong 2020 performance, The Wall Street Journal reported on Friday.

The startup ended 2020 in a healthy financial position despite the coronavirus pandemic. Layoffs and slashed marketing costs extended Turo’s cash runway by three years, and the company reported its first profitable quarter in 2020, according to the report. Turo CEO Andre Haddad expects the company to turn a full-year profit in 2022.

Turo’s website allows users to rent their own cars, whether they’re compact sedans or high-powered supercars. Those looking to rent private vehicles can then select from Turo’s marketplace instead of offerings from a legacy company like Hertz or Avis. Turo takes a cut of rentals’ revenue. 

Read more: Wall Street’s biggest firms are warning that these 7 things could crash the stock market’s party in 2021

Haddad told The Journal he is undecided on whether the company will raise capital with a traditional IPO or pursue an alternative method for listing shares. Direct listings, in which companies list shares without raising any capital, have grown increasingly popular with tech companies.

Merging with a blank-check company could also take Turo shares public. Special-purpose acquisition companies flourished in 2020 and drove record levels of IPO fundraising throughout the year. The companies raise cash through public offerings and use those funds to acquire a private firm. The merged entity then trades publicly.

Turo projects to reach a record $153 million in sales for 2020, according to The Journal. Losses in the second half of the year are estimated to fall to $7.2 million down from $46.9 million in the second half of 2019. Second-half revenue is set to land roughly 7% higher from the year-ago period too, The Journal reported.

Some of the company’s improved performance can be tied to the pandemic and its effect on travel. With air and cruise travel hit hardest by the health crisis, car rentals offered one of the few methods to get away from home in relative safety. The private-rental marketplace might also receive a boost from a pickup in auto sales through the pandemic.

Now read more markets coverage from Markets Insider and Business Insider:

How the pandemic upended the US job market in 2020, leaving permanent scars in its wake

Tesla short-sellers lost $38 billion throughout the automaker’s colossal 2020 rally

The founder of the world’s first vegan ETF explains how her market-beating fund is naturally built to include the pandemic’s biggest winners – and why industry titans like Facebook and Uber fit the bill

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‘It’s silly season’: Airbnb and DoorDash’s IPO rallies signal return of dot-com-era greed, strategists say

Airbnb IPO
The Nasdaq digital billboard in Times Square in New York on December 10.

  • Airbnb’s and DoorDash’s massive debut rallies suggest the IPO market is getting ahead of itself, top strategists said Thursday.
  • Airbnb spiked 115% when it began trading publicly for the first time on Thursday. DoorDash closed 86% higher in its Wednesday debut.
  • The first-day climbs revealed “euphoria and greed” last seen in the market during the dot-com bubble of the late 1990s, Paul Schatz, the president and chief investment officer of Heritage Capital, said.
  • “It’s silly season,” and investors need to differentiate between “a great company and a great price or value,” Rich Steinberg, the chief market strategist at the Colony Group, told Business Insider.
  •  Visit the Business Insider homepage for more stories.

Airbnb’s and DoorDash’s colossal post-IPO pops reveal unsustainable euphoria in the stock market, top strategists said.

Some of the year’s biggest initial public offerings took place this week, adding to an already record year for market debuts. DoorDash soared 86% when it began trading on Wednesday after raising $3.2 billion through its offering the day prior. Airbnb leaped 115% when it began trading Thursday afternoon, pushing its market cap above $100 billion and raising $3.5 billion.

The first-day rallies, while extraordinary, show “euphoria and greed” that’s likely not been seen in the stock market since the dot-com bubble of the late 1990s, Paul Schatz, the president and chief investment officer of Heritage Capital, said. Many investors are rushing to the new stocks, wanting to get in at any price, but such massive IPO bounces usually give way to similarly outsize losses, he added. 

“It’s silly season,” Rich Steinberg, the chief market strategist of the Colony Group, told Business Insider. “Investors need to distinguish the difference between a great company and a great price or value.”

Read more: 2 investment chiefs at John Hancock’s $692 billion investing arm say the post-COVID recovery might disappoint in 2021 – but investors can profit with these 3 strategies

Both strategists attributed some of that euphoria to the near-zero interest rates expected to stay put over the next three years. The Federal Reserve’s plan to hold rates at record lows leaves investors with fewer places to put their money, as the policy suppressed Treasury yields early in the pandemic. The Fed’s backstop of the corporate credit market placed similar pressure on bond yields.

The combination of near-zero interest rates, a “tsunami of liquidity,” and hundreds of billions in unallocated investor cash fueled the two buying sprees, Schatz said.

The week’s booms might be only the start. Investors could face “complete and utter mania” across the IPO market in the first half of 2021 as more firms look to tap the market while demand remains strong, the Heritage Capital president said. Investors should avoid trying to time such volatile debuts and instead be patient until stock prices better reflect firms’ fundamentals, he added.

“Being the last guy buying the opening of a hot IPO, at the height of this speculative excess in some of these names, typically does not end well,” Steinberg said. 

Now read more markets coverage from Markets Insider and Business Insider:

US stocks dip as stimulus hopes waver and jobless claims hit 11-week high

Blank-check firm Silver Spike rallies 49% after merging with cannabis-tech platform Weedmaps

Deutsche Bank says you should own these 14 stocks set to be post-pandemic winners – including one that could rally by 67%

Read the original article on Business Insider