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.
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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.

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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. 

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