Robinhood on Way to Redemption as Stock Rallies
Shares of trading app Robinhood are defying the odds and proving critics wrong in one fell swoop. After an IPO that left the stock beaten down, shares of Robinhood came back with a vengeance today, rising by a double-digit percentage to USD 45 vs. an issue price of USD 38.
Robinhood has tried to extend an olive branch to retail investors after interfering with the meme stock trade early in the year. The company looked to mend the fence by earmarking up to one-quarter of its shares for users of the zero-commission trading app, which is a higher allotment than Wall Street is used to.
Robinhood vs. Uber
Robinhood saw more than 300,000 customers take part in the IPO, while retail investors more broadly doled out less than USD 19 million for shares on the debut. This compares to close to USD 140 million that individual investors poured into ride-share company Uber’s IPO, as The Wall Street Journal points out. Despite the fact that the stocks trade in separate sectors, retail investors clearly had a greater appetite for Uber shares.
Incidentally, Uber will be reporting its Q2 earnings on Wednesday. The stock is up 2.5% in extended-hours trading on the heels of rival Lyft’s quarterly results in which revenues beat Wall Street estimates.
While there is no clear reason as to why the new stock rallied on Tuesday, investors do appear to be gearing up for options trading in Robinhood, which starts on Wednesday.
Robinhood’s IPO has been anything but smooth sailing. Instead, it has been mired in controversy. In addition to the chilly retail investor reception, key management members unloaded the stock leading into the market debut, including CEO Vlad Tenev.
In the hours leading up to the IPO, Tenev sold 1.25 million shares for a payday of roughly USD 45 million, a transaction that was planned. On Aug. 2, another U.S. SEC filing reveals that he kept his finger on the “sell” button before today’s rally. On the flip side, popular investment firm ARK Invest has been scooping up HOOD shares.
While some investors argue that he is within his rights, others are quick to point out that the optics are bad. That’s because Tenev also reportedly said that Robinhood “wants to make first-time investors into long-term investors.”