Robinhood, the stock trading app that blew up thanks to the retail investor boom, made its highly-anticipated public debut on the Nasdaq this week under the ticker HOOD.
But although it was one of the most hyped debuts in the recent past, the company has ended up in the record books for all the wrong reasons.
After beginning trading at $38 per share, the company, valued at $32 billion, sunk as low as 10%, ending the session at $34.82 per share and a new market cap of $29 billion.
HOOD’s disappointing debut takes the record from another brokerage company, MF Global Holdings Ltd., which ended its first day down 8.2% when it went public in 2007.
In 2020, Robinhood made a net income of $7.45 million on net revenue of $959 million, a notable increase from its loss of $107 million on $278 revenue in 2019. The lacklustre debut might come as a surprise to investors who took the company’s profitability as a sign of a promising investment, especially considering not many other IPOs have been lately.
Other bullish signs were Robinhood’s profits made earlier this year, with $522 revenue generated in the first quarter of 2021, up a significant 309% from the $128 million a year prior.
The brokerage app—which offers crypto, options, and equity trading—experienced enormous growth thanks to the recent meme stock mania. It reports 18 million clients, up from 7.2 million, an increase by 151%, and predicts that the amount of accounts has reached 22.5 million in its second quarter.
But business hasn’t always been booming for the brokerage, with it facing a loss of $1.4 billion over the GameStop saga in the first quarter of 2021. Looking ahead, the company also noted that with meme stocks losing momentum, a decline in trading might be inevitable.
In an amended prospectus released last week, the company said, “We expect our revenue for the three months ending September 30, 2021, to be lower, as compared to the three months ended June 30, 2021, as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptocurrencies”.
Robinhood sold 52.4 million shares, raising an amount close to $2 billion, with its co-founders Vlad Tenec and Baiju Bhatt each selling $50 million. Investment banks that led the public offering are Goldman Sachs and JPMorgan Chase.