Notorious trading app, Robinhood finally goes public today. Wharton professor David Erickson has called it the "the most concerning high profile IPO since WeWork tried to go public a few years ago." Reasons include Robinhood's murky business model and trading policies, trading outages and shutting off buying of meme stocks in the GameStop trading mania earlier this year.
Robinhood will trade on the Nasdaq under the ticker HOOD, at an expected price of $38-42 and is looking to sell 55 million shares to raise as much as $2.3 billion. At the top end of the range, Robinhood would be valued at $35 billion and the cofounders will have stakes worth $2.8 billion each.
Robinhood is the third-largest brokerage based on number of funded accounts, behind Fidelity and Charles Schwab with its 22.5 million trading accounts. The IPO implies a ~$1,350 valuation per account, lower than peers (all over $2,000) due to mostly retail trading audience.
Robinhood is also reserving 20-35% of its IPO shares for its own clients, one of the largest retail allocations ever. Typically retail traders cannot get hands on IPO shares till they start trading so they miss out on the pop.
Short Squeez Takeaway: Robinhood might kick-off to volatile trading since many retail traders hold the stock and because of the company's loose lock-up restrictions (employees can sell 15% of their shares immediately compared to the 6-month lock period typically). Robinhood also doesn't have good precedent from IPOs that raised more than $2 billion this year – all six prior ones are trading below their IPO prices...