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A few months ago, this popular trading app had a mediocre debut on the Nasdaq Composite Index, after it was caught in a confrontation between a new generation of retail investors and Wall Street hedge funds.
The stock price of Robinhood Markets Inc fell by more than 10% after the opening of the Nasdaq Composite Index on Thursday. The online brokerage company is valued at approximately US$28 billion, making it one of the most anticipated listed companies this year. The response was poor.
The stock price fell to $34 in early trading, well below the $38 issue price, which is already at the low end of Robinhood’s initial offering price (IPO) range.
The company-arguably the groundbreaking fintech startup of this generation-set a price for its IPO and raised $2.1 billion on Wednesday.
A few months ago, it was caught in a standoff between a new generation of retail investors and Wall Street hedge funds.
Earlier this year, after its clearinghouse deposit requirements increased tenfold, the company decided to restrict the trading of some popular stocks, which angered U.S. lawmakers and users of its apps, which is the preferred purpose of retail investors land.
Its easy-to-use interface has made it popular among young investors who trade at home during the restrictions caused by the coronavirus, and its popularity has soared in the past 18 months.
But Jeff Zell, a senior research analyst at IPO Boutique, said that at this level of valuation, there are more doubters than believers about the company.
“That said, there is a ray of hope for this performance or underperformance because it set’expectations’ at the low end of scale when Robinhood reported its first few quarters,” Zell said.
“But overall, the company still has a lot to prove,” he added.
Due to the so-called meme stock trading frenzy, Robinhood’s revenue increased fourfold in the March quarter. But this comes at a price, making it the center of multiple regulatory investigations.
The company was forced to raise US$3.4 billion in emergency funds due to financial strains caused by the substantial increase in retail transactions.
Robinhood was founded in 2013 by roommates Vlad Tenev and Baiju Bhatt of Stanford University. The two will have a majority of voting rights, with Bhatt holding approximately 39% of the outstanding shares and Tenev holding approximately 26.2%.
The company plans to reserve 20% to 35% of its products for users of its trading platform, allowing investors to conduct unlimited commission-free transactions on stocks, exchange-traded funds, options and cryptocurrencies.
Robinhood Chief Financial Officer Jason Warnick told Reuters that he expects the IPO to demonstrate the benefits of allocating large stocks to retail investors.
The company revealed on Tuesday that before the online broker publicly announced restrictions on the trading of these and other meme stocks on January 28, it had received inquiries from US regulators asking whether employees had traded GameStop Corp and AMC Entertainment.
The company also said that it is investigating whether it meets the personnel registration requirements.
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