Robinhood’s (HOOD) IPO was the culmination of the retail investor theme that’s dominated 2021. The popular investing platform has 22.5 million users, but far fewer were interested in actually owning a piece of the company at its public debut.
According to securities research firm Vanda, retail investors net bought $18.85 million worth of the company’s stock. Despite Robinhood’s relationship to this investor class, it isn’t a very high number, Vanda analysts wrote in a note Friday.
“That’s a relatively low number compared to other high-profile IPOs,” the note said. “Didi, for instance, saw retail investors buy $69 million on its debut and Coinbase took up $57.35 million only a couple of months ago.”
There were earlier indications interest in the IPO would be less than the company hoped: Robinhood’s stock was priced at $38, at the lower end of the range it sought, up to $42. Furthermore, according to the Wall Street Journal, the amount of shares allocated to its customers was only 20% to 25%, the lower end of the range that could have been as much as 35%.
On Thursday shares fell more than 8% from the opening price of $38 to just under $35, perhaps because many of the retail investors who would have otherwise wanted to buy already had access if they wanted — and other investors wanted to take advantage of the shorter lockup period to liquidate their positions.
Though it isn’t that unusual for shares of a company to fall in its first day of trading, the past two years have seen solid IPO pops; Airbnb (ABNB) surged 113% on its market debut. According to Nasdaq data, around a third of IPOs fall on their first day, but so far this year the average IPO pop is 40.5%.
Every circumstance is, of course, individual, and a reason for the tepid first day performance could be simply related to doubts about the company — or its valuation. A $38 stock price for Robinhood means a $32 billion value for the company, which the market seems to believe is too high. As a “tech company” and Silicon Valley upstart rather than a more traditional Wall Street-esque firm, it might have momentum behind it, but it makes less money than its competitors, and there’s no guarantee that the incredible growth in 2020 and 2021 will continue.