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Robinhood has priced its shares at $38 apiece, the low end of its target range, reflecting weak investor demand for the much anticipated IPO of the popular trading app.
The company, which wanted to sell 55 million shares, had set a range between $38 and $42 per share. While the most popular tech IPOs often price above expectations, Robinhood’s value indicates that investors’ appetites were not insatiable for the brokerage’s stock.
The latest offer price of $38 announced late Wednesday gives Robinhood a valuation of $31.7 billion. Private investors valued it at more than $11 billion earlier in August. Share trading is expected to begin Thursday in the Nasdaq stock market.
California-based Robinhood became a favorite venue for many first-time stock investors, offering commission-free trades that it encouraged with rewards, bonuses, and push notifications. With a median age of 31, her clients tend to be younger and have smaller account balances than established online brokers such as Schwab, Fidelity, and ETrade.
It has experienced explosive growth, doubling the number of accounts on its platform to 31 million since the beginning of the year.
However, Robinhood has also come under fire from regulators for its app’s game-like features, limited customer service and reliance on a controversial practice of selling transactions called payment for order flow. In June, the Financial Industry Regulatory Authority fined Robinhood $70 million for inflicting “widespread and significant harm” to customers. It was the biggest penalty Finra ever handed out.
The offering allocated up to 35 percent of the shares to its own clients. Modest interest in Robinhood’s IPO suggests investors were not immune to the recent high-profile scrutiny and concerns about how the brokerage would maintain its high trading volumes in a post-pandemic world where people had time for other pursuits.
Robinhood’s offer paves the way for a windfall for its executives and investors. At the IPO price, Robinhood co-founders Baiju Bhatt and Vlad Tenev would own shares worth $3 billion and $2 billion, respectively.
Index Ventures, the company’s largest outside investor, is said to have a stake of $3.2 billion.
Robinhood’s extraordinary growth has periodically led to technical glitches during high-volume periods, and during a rapid rise in GameStop’s stock meme stock in January, the platform had to suspend trading and raise billions to meet market capital requirements. creators.
Investors who provided the $3.5 billion in emergency financing will be able to receive shares at a 30 percent discount to the offering price as their debt converts into equity.
Bhatt and Tenev will retain majority voting control of Robinhood through a dual-class stock structure, meaning they will hold a minimum of 65 percent of the voting rights despite owning less than 20 percent of the company’s stock.
This high level of voting control was cited by institutional investors as a concern when participating in the offering, despite Robinhood’s strong recent performance.