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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Cathie Wood’s Ark Invest bought more than $45 million of Robinhood stock as shares slumped in their trading debut

Robinhood Vlad standing at Nasdaq time square billboard
  • Cathie Wood’s flagship Ark Innovation ETF bought Robinhood as the trading app fell in its first day of public trading.
  • Wood scooped up nearly nearly 1.3 million shares of Robinhood worth over $45 million.
  • Fund filings show the ETF now holds roughly 3.6 million shares of Robinhood worth $126 million.
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Cathie Wood’s Ark Invest scooped up shares of Robinhood as the brokerage app fell on its first day of trading Thursday.

Wood’s flagship Ark Innovation exchange traded fund purchased nearly 1.3 million shares of Robinhood worth over $45 million based on Thursday’s closing price of $34.82. Fund filings show the Ark Innovation ETF now holds roughly 3.6 million shares of Robinhood worth $126 million, indicating Ark also bought the company before it made its public debut.

The mobile brokerage app priced its IPO Wednesday night at $38 per share, representing the bottom end of its targeted range of $38 to $42 per share. It ended its first day of trading down 8.37%.

Shares of Robinhood extended losses in premarket trading Friday, falling by more than 3% to around $33.70.

Wood’s latest activity comes as she rapidly sheds Ark’s positions in Chinese technology stocks amid an ongoing regulatory crackdown in Beijing.

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Robinhood CEO says the meme-stock craze has helped ailing companies survive, and that high retail investor participation is fundamentally good for markets

Robinhood CEO Vlad Tenev stands in front of a window overlooking New York City.
Robinhood CEO Vlad Tenev.

  • Robinhood CEO Vlad Tenev told CNBC retail investors in meme stocks have helped struggling companies.
  • Tenev made his comments ahead of the trading app’s own trading debut.
  • Robinhood earlier this year angered many customers when it halted buying of GameStop, AMC, and other meme stocks.
  • See more stories on Insider’s business page.

Robinhood CEO Vlad Tenev said Thursday that retail investors who’ve put money into so-called meme stocks have been a benefit to struggling companies and the market overall.

“I think what’s interesting with what we’ve seen in retail investing over the past year is that a lot of these companies have been hit hard by the pandemic, right?,” including airlines, retailers, and movie chains, said Tenev in an interview on CNBC before the online brokerage’s own stock began trading.

“[You] have the institutions that are basically writing these companies off and then retail investors coming in and keeping them up and supporting them.”

Video game retailer GameStop and movie theater chain AMC Entertainment have become popular stocks among retail traders active on Reddit and Twitter. Tenev’s firm has been a force behind the retail trader movement, with millions of new investors funding accounts on the app during the pandemic.

There are “customers that love these companies they want them to thrive. And you’re seeing [companies] also get resources that allow them to hire really good management teams, in some cases, and then build for the future,” Tenev said.

AMC, the world’s largest movie-theater operator, has taken advantage of the rally in its shares this year, saying in June it had raised about $1.25 billion through selling shares during the second quarter and the funds would strengthen its balance sheet.

“I don’t know if people have understood the ramifications of what high retail participation in the markets means but I think fundamentally it’s a very good thing and we’re excited to be a part of it,” said Tenev.

Robinhood’s shares slumped 8.4% to $34.82 in their trading debut, finishing below the IPO price of $38. The company set aside up to 35% of its IPO shares to individual investors.

Robinhood angered many of its customers earlier this year when the trading app halted buying of GameStop, AMC, and other meme stocks during a stunning 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.

According to Goldman Sachs, retail investors have been on track to put $400 billion into the stock market in 2021.

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S&P 500, Dow close on the brink of records as investors bet on the Fed’s continued economic support after weak GDP data

happy trader nyse

US stocks rose Thursday as the latest batch of economic data eased investor concerns over inflation and the Federal Reserve’s plan to eventually taper bond purchases. All three major indexes closed just shy of record highs.

Robinhood fell as much as 12% to $33.35 a share before paring losses in a volatile first day of public trading. The company priced its IPO late Wednesday night at $38 per share, representing the bottom end of its targeted range and giving Robinhood a valuation of $32 billion.

Here’s where US indexes stood shortly after the 4 p.m. ET close on Thursday:

The S&P 500’s flirtation with all-time highs may be a sign to sell, according to Bank of America. The firm said in a Tuesday note that investors should take advantage of the benchmark’s strength and sell stocks to raise cash as bearish indicators begin to pile up.

In economic news, US gross domestic product grew at an annualized rate of 6.5% in the second quarter of 2021, missing the 8.5% jump estimated by economists. The quarter placed GDP above its pre-pandemic peak for the first time.

Meanwhile, jobless claims fell to 400,000 last week, lower than the prior week but higher than economists expected.

West Texas Intermediate crude rose as much as 1.8%, to $73.68 per barrel. Brent crude, oil’s international benchmark, increased 1.9%, to $76.15 per barrel, at intraday highs.

Gold climbed as much as 1.4% to $1,832.71 per ounce.

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Robinhood drops 12% in volatile public-trading debut after IPO valuing it at $32 billion

Vlad Tenev, CEO and Co-Founder, Robinhood in his office on July 15, 2021 in Menlo Park, California.
Vlad Tenev, CEO and co-founder, Robinhood.

  • Robinhood whipsawed in its trading debut on Thursday, with shares initially jumping 6% before falling as much as 12%.
  • The online trading app was valued at $32 billion when it priced its IPO at $38 per share on Wednesday.
  • Robinhood raised $2.1 billion from its IPO and allocated a portion of shares to its user base.
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Online trading app Robinhood whipsawed in its post-IPO debut on Thursday, with shares climbing 6% before falling as much as 12%. Shares hit a high of $40.22 before falling to a low of $33.60.

The company priced its IPO late Wednesday night at $38 per share, representing the bottom end of its targeted range of $38 to $42 per share. The IPO raised $2.1 billion for the company and gave it a valuation of $32 billion.

Robinhood last raised $3.4 billion earlier this year, with shares trading on private secondary markets at a valuation around $40 billion. The company raised the money amid a surge in retail trading in meme-stocks like GameStop and AMC Entertainment.

The company has seen explosive growth amid the COVID-19 pandemic and government stimulus checks, with millions of Americans becoming first time investors in the stock market. Robinhood has more than 18 million accounts and 17.7 million active monthly users.

While the brokerage firm is not yet profitable, the company saw revenue grow 245% to nearly $1 billion in 2020. That revenue growth accelerated in the first quarter of 2021, surging 309% to $522 million, according to its S-1 filed with the SEC last month.

Much of that growth is coming from options and crypto trading, two highly speculative areas of markets than often lead to either big losses or massive fortunes.

Unique to Robinhood’s IPO is the company’s decision to allocate up to 35% of its IPO shares to users of its app. Retail investors are often restricted from investing in IPOs at the pricing afforded to institutional investors.

While Robinhood’s IPO represents a big milestone for the company, there is still a long way to go before co-founders Vlad Tenev and Baiju Bhatt can cash in on their hefty compensation awards. Both founders will be awarded $1.4 billion if Robinhood’s stock price reaches $101.50 by 2025.

Robinhood trades on the Nasdaq under the symbol “HOOD.”

Read more: Top 16 meme stocks this week on Reddit: Tesla tops the charts after record earnings while Chinese stocks get smacked amid brutal regulatory crackdown

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Robinhood is going public. Warren Buffett, Michael Burry, and other top investors have blasted the trading app and warned day traders to be careful.

Michael Burry against a gray promotional backdrop for the movie "The Big Short."
Michael Burry.

  • Robinhood is poised to go public on Thursday at a $32 billion valuation.
  • Warren Buffett, Michael Burry, and other top investors have blasted the trading app as reckless.
  • Market veterans have also warned day traders against rampant speculation and taking on debt.
  • See more stories on Insider’s business page.

Robinhood is set to go public on Thursday at a potential $32 billion valuation, capitalizing on booming demand from retail investors seeking to trade stocks, cryptocurrencies, and other assets during the pandemic.

The trading app is popular among amateur investors and day traders because it doesn’t charge commissions, allows fractional investing, and trusts its users to trade on margin and buy and sell risky, complex financial products such as options.

However, Warren Buffett, Michael Burry, and other leading investors have accused Robinhood and its peers of encouraging speculation and excessive risk-taking. They have also warned market newbies not to borrow too much, trade things they don’t understand, or treat investing like a game they’re guaranteed to win.

Robinhood didn’t immediately respond to a request for comment from Insider.

Here’s what 10 top investors have said about Robinhood and the day-trading boom. Their quotes have been lightly edited and condensed for clarity:

Warren Buffett

Warren Buffett
Warren Buffett, the chairman and CEO of Berkshire Hathaway.

“There’s nothing illegal about it, there’s nothing immoral. But I don’t think you build a society around people doing it. I hope we don’t have more of it.” — accusing Robinhood of encouraging users to trade options rather than invest for the long term. (May 2021)

Michael Burry

Michael Burry against a promotional backdrop for the movie "The Big Short."
Michael Burry, the star of “The Big Short” and head of Scion Asset Management.

“If you do not use #robinhood, you have to see it to understand what #gamification of #stonks/options means. So here it is. If this looks like a serious investing app to you, and NOT a dangerous casino ‘fun for all ages,’ you’ve been #gamified.” (February 2021)

 

Mark Cuban

Mark Cuban speaking at Business Insider's IGNITION conference on December 3, 2018.
Mark Cuban, the “Shark Tank” star and Dallas Mavericks owner.

“It’s not investing, and it’s almost not even trading, it’s more like revenge. It is the revenge of the nerd. It’s the revenge of the little guy.” — commenting on the horde of retail investors who sparked the meme-stock boom (February 2021)

“If you’re a day trader and you can walk and chew gum, you are making money right now. You’re doing the same thing they did in the late ’90s. You’re rolling it. You think everybody is a genius in a bull market.” (June 2020)

Chris Sacca

chris sacca
Chris Sacca, the founder of Lowercase Capital and an early investor in Uber, Twitter, and Instagram.

“I have axes to grind against a lot of the guys you’re wrecking, and I love to hear about real people stacking chips. But, please, from someone who has been there … don’t trade what you can’t afford to lose.” — advising the retail investors who executed short squeezes and hammered hedge funds to be careful (January 2021)

“To the angry Robinhood bros who got into trading stocks this year: I was wrong. You’re amazing. This has nothing to do with the market. It’s all you and your mad skillz. Don’t take profits off the table. Double down, on margin. Borrow everything you can. Stonks never go down!” — sarcastically responding to the backlash from day traders after he tweeted they got lucky and should cash out some of their profits (January 2021)

Charlie Munger

charlie munger
Charlie Munger, Warren Buffett’s business partner and Berkshire Hathaway’s vice-chairman.

“Robinhood is beneath contempt. It’s a gambling parlor masquerading as a respectable business. It’s basically a sleazy, disreputable operation.” (May 2021)

Leon Cooperman

Leon Cooperman holding his glasses up to his right temple.
Leon Cooperman, the former CEO of Omega Advisors, runs a family office now.

“They are just doing stupid things. This will end in tears.” — commenting on retail traders buying shares in bankrupt companies and making other high-risk trades (June 2020)

Jim Chanos

Jim Chanos
Jim Chanos, the president and founder of Kynikos Associates.

“They are going to trade themselves into oblivion. We are at prices now where the crowd that is betting on margin and betting through options had better be right. Anything that corrects and reverts to the mean, or to real valuation metrics, is going to destroy a whole generation of investors.” (November 2020)

Jeffrey Gundlach

Jeffrey Gundlach
“Bond King” Jeffrey Gundlach, the CEO of DoubleLine Capital.

“There’s been an incredible increase in tiny retail investor activity in terms of the accounts on Robinhood and other platforms that have just exploded in term of size. I think that’s pretty dangerous. These people that are buying slices of the stock market don’t even know what they’re doing, and have probably lost money already.” (June 2020)

“We’ll have a tremendous unwind of a lot of the money that thinks the stock market is a one-way thing.” (March 2021)

Howard Marks

Howard Marks
Howard Marks, the cofounder and co-chairman of Oaktree Capital Management.

“Some people think it’s a gambling game, like betting on football. It’s not healthy to have people who are buying stocks for fun. It reminds me of the people who were day trading in 1999 and declaring day trading a ‘can’t miss’ strategy. The tech stocks crapped out in 2000.” (June 2020)

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Robinhood prices IPO at $38 per share, valuing the online brokerage app at $32 billion

Robinhood on cellphone
  • Robinhood priced its IPO at $38 per share on Wednesday, valuing the company at about $32 billion.
  • The online brokerage app revealed surging growth in its S-1 filing amid the COVID-19 pandemic and government stimulus checks.
  • Robinhood is set to trade on the Nasdaq under the symbol “HOOD” on Thursday.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Robinhood priced its IPO at $38 on Wednesday, valuing the online brokerage app popular with retail investors at roughly $32 billion. The Wall Street Journal first reported the pricing.

Robinhood’s IPO pricing came it at the bottom end of the price range it had initially been targeting during its roadshow of $38 to $42 per share. Robinhood last raised $3.4 billion earlier this year, with shares trading on private secondary markets at a valuation around $40 billion.

The company has seen explosive growth amid the COVID-19 pandemic and government stimulus checks, with millions of Americans becoming first time investors in the stock market. Robinhood has more than 18 million accounts and 17.7 million active monthly users.

While the brokerage firm is not yet profitable, the company saw revenue grow 245% to nearly $1 billion in 2020. That revenue growth accelerated in the first quarter of 2021, surging 309% to $522 million, according to its S-1 filed with the SEC last month.

Much of that growth is coming from options and crypto trading, two highly speculative areas of markets than often lead to either big losses or massive fortunes.

Unique to Robinhood’s IPO is the company’s decision to allocate up to 35% of its IPO shares to users of its app. Retail investors are often restricted from investing in IPOs at the pricing afforded to institutional investors.

While Robinhood’s IPO represents a big milestone for the company, there is still a long way to go before co-founders Vlad Tenev and Baiju Bhatt can cash in on their hefty compensation awards. Both founders will be awarded $1.4 billion if Robinhood’s stock price reaches $101.50 by 2025.

Robinhood is set to trade on the Nasdaq under the symbol “HOOD” beginning on Thursday.

Read more: Top 16 meme stocks this week on Reddit: Tesla tops the charts after record earnings while Chinese stocks get smacked amid brutal regulatory crackdown

Read the original article on Business Insider

The average Brit plans to invest almost 20% more each month after the pandemic, extending the retail trading boom, survey finds

Above angle view of a young man using a trading app.
In addition to executing orders, brokers also provide a range of educational resources and investing advice.

  • The average Brit plans to spend 19% more each month on investing post-pandemic, a Barclays Smart Investor survey says.
  • Half of those surveyed said they will cut back on other spending to fuel their lockdown investing habits.
  • On Monday, trading app Robinhood said it had recorded lower trading levels between March and June.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The average UK investor plans to increase their investments by 19% each month as COVID-19 restrictions in the country come to an end, extending the retail trading boom that originated during the pandemic, a Barclays Smart Investor survey found.

Younger people are set to increase their investments by an even higher number. The survey, released on Wednesday, found Gen Z investors, many of whom got hooked on investing through the rise of ‘finfluencers’ and financial social media content during the pandemic, are planning to spend an additional 36% a month on investments post-pandemic.

Across all age groups, only 6% of the roughly 2,000 people surveyed, said they planned to cut how much they invest each month. They cited the return of “normality” and the increased spending on activities such as holidays, meals out and weekend trips.

In contrast, around 50% said they would spend less on such activities to support their investing habits.

“The prediction that many will continue, or increase, the amount they invest going forward is likely driven by a rise in lockdown savings, with the ONS reporting that UK household savings are nearing an all-time high.” Clare Francis, director of Barclays Smart Investor said.

76% of those surveyed said they would maintain their investing routine and as few as 4% of those who began investing during the pandemic said they would stop once restrictions in the UK were lifted.

“Today’s findings show just how much the pandemic has changed our approach to saving and investing. As new investors flocked to the stock market last year, it was easy to assume that it was just a lockdown hobby, and that many would go back to their old spending habits when the world re-opened.” Francis said.

Retail trading apps and platforms like Robinhood and eToro, which allow individuals to invest in stocks and digital assets like crypto currencies via their phones or laptops, saw a surge in popularity throughout the pandemic.

Robinhood, which makes its stock-market debut this week, however noted a slowdown of activity on its platform in the second quarter of this year, which was when lockdown restrictions in many countries eased. In its updated prospectus published on Monday, the company said it expected revenue to drop in the three months to September 30 because of the decline in trading activity.

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Robinhood’s IPO presents ‘alarming’ risks for investors as regulators weigh a crackdown on the company’s main source of revenue, says a veteran stock analyst

Robinhood on cellphone
Robinhood app

  • Robinhood’s upcoming IPO is overvalued and packed with regulatory risk, according to veteran stock analyst David Trainer.
  • Trainer’s investment research firm said Robinhood’s main source of revenue-payment for order flow-could be banned by regulators.
  • A ban would severely harm Robinhood’s business model, Trainer said.
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Robinhood’s upcoming initial public offering presents “alarming” risks to investors as regulators could stifle the brokerage app’s main source of revenue, according David Trainer, CEO of investment research firm New Constructs.

81% of Robinhood’s revenue in the first quarter of 2021 came from a controversial practice known as payment for order flow. The brokerage app argues that payment for order flow allows it to offer free trading to their customers. In June, SEC chief Gary Gensler questioned whether payment for order flow provides investors with best execution.

“Payment for order flow raises a number of important questions. Do broker-dealers have inherent conflicts of interest? If so, are customers getting best execution in the context of that conflict? Are broker-dealers incentivized to encourage customers to trade more frequently than is in those customers’ best interest?” the SEC chair said in prepared remarks.

If the SEC ever outlaws payment for order flow, Robinhood may not be able to offer commission-free trading, which would put the app at a disadvantage against competitors Fidelity and Charles Schwab. Unlike Robinhood, those firms generate more revenue from other services, he added.

In June, SEC chair Gary Gensler said the US regulator is reviewing payment for order flow, but the practice is still legal. Trainer noted that Robinhood hired former SEC Commissioner Dan Gallagher as chief legal officer in 2020 and paid him $30 million after seven months.

“$30 million to one person is a lot for a firm without any regulatory concerns,” Trainer said. “The mounting regulatory risk Robinhood faces makes us concerned that the public may see Robinhood’s stated goal to ‘democratize investing’ as a ruse to lure them into speculative trading and gambling that benefits Robinhood more than the individual investor.”

Trainer also said that Robinhood’s valuation is worth no more than $9 billion, significantly less than the firm’s expected $35 billion price tag.

According to Trainer, Robinhood’s $35 billion valuation implies the firm will be able to maintain its pandemic-era profitability, grow revenue by almost 3,000%, and compete with established rivals like Schwab. But the app lacks scale and with the meme stock frenzy fading for now, its best years may already be behind it, he said.

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Robinhood said it expects to pay a $30 million fine as part of anti-money laundering probe of its crypto business

Robinhood
  • Robinhood said it expects to pay a $30 million penalty related to an anti-money laundering probe of its crypto business.
  • The penalty would be on top of a $70 million fine from FINRA, and a $65 million settlement with the SEC.
  • The disclosure came in an amended S-1 filed with the SEC on Monday.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Robinhood said it expects to pay a $30 million penalty in relation to an anti-money laundering probe of its cryptocurrency business, according to an amended S-1 filed with the SEC on Monday.

The online trading app said that in July of 2020, the New York Department of Financial Services said Robinhood’s crypto unit had a number of “matters requiring attention,” primarily focused on anti-money laundering and cybersecurity-related issues.

In March, a subsequent investigation by the Consumer Protection and Financial Enforcement division of the NYDFS found alleged violations of anti-money laundering and New York Banking Law requirements, “including the failure to maintain and certify a compliant anti-money laundering program,” according to the filing.

Other violations include of cybersecurity and virtual currency requirements, “including certain deficiencies in our policies and procedures regarding risk assessment, lack of an adequate incident response and business continuity plan, and deficiencies in our application development security,” the filing said.

Robinhood said its crypto business has reached “a settlement in principle with respect to these allegations, subject to final documentation.” The brokerage firm expects to pay a monetary penalty of $30 million and engage a monitor, likely to prevent further violations.

This isn’t Robinhood’s first multi-million dollar penalty in relation to its business operations. In December, the company agreed to pay a $65 million settlement with the SEC for misleading its customers about revenue sources and failing to satisfy its duty of best execution for customer trades.

And in June, Robinhood agreed to pay a $70 million fine with FINRA to settle claims that the brokerage misled millions of customers, approved ineligible traders for risky strategies, and didn’t supervise technology that locked millions out of trading, the regulator announced today.

The $165 million in total one-time fines Robinhood has been ordered to pay represent 32% of the company’s first quarter revenues of $522 million.

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