Robinhood breaks record for worst first day of trading for an IPO of its size

Investing app Robinhood has reportedly broken the record for the worst first day of trading for a company to raise so much capital in its IPO.

The FinTech company’s shares dropped by 8.4% in its debut, which is the highest drop of the 51 companies to raise as much capital as it did for its IPO, according to a report from Bloomberg. The record was previously held by MF Global Holdings, which closed its inaugural trading day down 8.2%.

While the company did sizable drop in the price of its shares, it still raised a substantial amount of capital. The company still manged to close the day at a valuation of $32bn, making it one of the biggest IPOs this year.

Robinhood had initially been targeting a valuation of $35bn, it was reported prior to its IPO.

Due to the company’s share structure being dual class, which gives the founders Vlad Tenev and Baiju Bhatt greater voting rights for their shares, the majority voting power will remain with the co-founders.

Robinhood is a retail investing app, which enables consumers to complete unlimited commission-free trades in stocks, ETFs, options and cryptocurrencies.

In the lead up to the IPO, Robinhood raised several large-scale funding rounds. The most recent was a $2.4bn capital injection in February 2021, which was aimed at helping it bolster its platform capabilities.

Prior to that funding round, the FinTech company raised a $1bn in emergency funds. Robinhood needed the funds to pay customers owed money from trades as well as supply cash to its clearing facility to stop loses from trading partners.

It is unclear what the company was valued at for these rounds, but in September 2020, Robinhood hit an $11.7bn valuation. 

Robinhood hit controversy earlier in the year due to its hand in the Gamestop saga. When the stocks of the video game retailer started to skyrocket, Robinhood took the decision to prevent people from freely trading the stocks. The move was met with a massive backlash from users. Financial regulator FINRA later fined the investing app $70m for misleading customers, approving ineligible traders for risky strategies and not supervising technology that failed and locked millions out of trading.

In a hearing before the US Congress, Tenev stated the actions were “unacceptable” and the company is making sure it won’t happen again.

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