Robinhood started trading at $ 38, down about 10 percent, recovered, but still closed at 8 percent at $ 34.90 on the first day of trading. It’s the worst first day among 51 companies that garnered as much as Robinhood or more, by Bloomberg. It’s also bad news about Robinhood’s attempt to offer private investors pieces of IPOs.
Robinhood shares priced at the end Target Price Range $ 38- $ 42 per shareMaybe out of concern about volatility or maybe because Robinhood wanted to secure a pop investment for private investors. And while Robinhood had said it would distribute as much as 35 percent of its stock to retail, only 20 percent went to retail, which “showed less interest than expected.” by New York Times.
Because the shares were traded downwards, institutional investors – those who traditionally buy the IPO and bought most of it – could be a future IPO if there are a lot of private investors involved, Pitchbook analyst Robert Le. This can mean that bankers and other companies avoid giving private investors as much access as possible to future IPOs.
A bad first trading day doesn’t necessarily mean much to Robinhood in the long run. I mean, Facebook had a catastrophic IPO in 2012 – pricing was $ 38, doing a lot of nothing on the first day and then dropping over the next trading days. Facebook’s current stock price is otherwise $ 358.32. It has undoubtedly succeeded! So I don’t know what today means for the company’s Robinhood. In addition, Robinhood sold shares to its customers – and they can be very loyal investors if they like the product.
It may now be that private investors are not trying to maximize their returns, says Josh White, an assistant professor at Vanderbilt University, formerly an economist at the Securities and Exchange Commission. They might just do some gamble. “Investors are trying to maximize their happiness, not their wealth,” White says. “A lot of people get utility – fun or joy – out of trading.” Maybe he suggests that this is better than going to a casino or playing at DraftKings because companies can use the money to invest in jobs and growth.
Robinhood is synonymous with the rise of meme stocks and retail investment. In fact, in the complaint The SEC filed today Against Nikola’s founder Trevor Milton, it says Milton “started a relentless public relations blitz aimed at a class of investors he called” Robinhood investors. ” Milton is securities fraud; Nikola, who was priced over $ 65 last year, is now worth $ 12.26.
If these private investors lose a lot of money, it can be detrimental to brokers – not just Robinhood. “In the end, these are the customers that all brokerage firms want to attract,” White says. “If they lose a lot of money now, are they going to stop investing altogether?”