Fast-growing but controversial, Robinhood falls in Nasdaq debut

Robinhood had a unsmooth commencement connected Wall Street Thursday, falling sharply successful its Nasdaq debut aft the fast-growing online trading app raised $1.9 cardinal successful an archetypal nationalist offering.

Trading nether the ticker "HOOD," Robinhood Markets ended astatine $34.82, dropping 8.4 percent aft entering the marketplace astatine $38.

The Silicon Valley firm, launched by 2 friends who met astatine Stanford University, has billed itself arsenic an accessible and amusive level for young and first-time investors, scored outsized maturation during the coronavirus pandemic.

But the company, which present has a valuation of astir $29 billion, has besides drawn skepticism implicit its concern exemplary and disapproval from cardinal regulators implicit its practices.

Commentators connected CNBC monitoring the IPO described the offering arsenic "polarizing," with large voices successful the concern assemblage connected some sides.

"The marque Robinhood truly stands for this adjacent procreation of consumers," the company's Chief Executive Vladimir Tenev said successful an interrogation with the network.

The institution had acceptable speech 20 to 35 percent of shares for customers successful the archetypal offering, an unusually ample information for idiosyncratic investors. But Tenev declined to supply the level of participation.

'Next generation' investors

Founded successful 2013 by Tenev and Baiju Bhatt, Robinhood has pitched itself arsenic a niche for underinvested "everyday people," who are younger and much diverse, according to a prospectus. Robinhood's median lawsuit property is 31.

Individual investors utilizing the app played a relation successful the alleged "Reddit Rebellion" earlier this twelvemonth erstwhile retail investors connected the societal web joined forces to enactment beaten-down stocks specified arsenic GameStop and BlackBerry to combat backmost against organization investors.

After crisp maturation during the pandemic, the institution had much than doubled the fig of idiosyncratic accounts to 18 cardinal astatine the extremity of March, with $81 cardinal successful assets nether its custody, compared to conscionable $14.2 cardinal astatine the extremity of 2019.

The firm, whose commission-free banal trading exemplary has been copied by immoderate rivals, aims to turn further by attracting much customers, providing further fiscal services to customers arsenic they adhd wealthiness and expanding internationally.

Tenev highlighted cryptocurrency trading arsenic different maturation area, telling CNBC that trading connected integer currency "is an accelerant perchance for planetary enlargement successful definite markets."

Regulator risk

But Robinhood's emergence has not been without controversy.

Last month, soon earlier the institution filed papers to spell public, it agreed to wage a $70 cardinal good to settee charges from regulatory assemblage FINRA that it harmed thousands of consumers done "false and misleading" communications and different lapses.

And the institution has recovered itself successful the crosshairs of the US Securities and Exchange Commission (SEC) and its main Gary Gensler, who has taken purpose astatine its concern model.

Although Robinhood does not complaint users commissions, it takes successful gross from different fiscal firms by routing trades to those companies, a signifier known arsenic "payment for bid flow" that is barred successful different countries including Britain and Australia.

Gensler said specified arrangements rise questions astir conflicts of involvement and besides alteration firms to commercialized user data.

Tenev defended the practice, saying it "has led to a overmuch (more) divers acceptable of radical participating successful the markets," though helium acknowledged it could beryllium "better explained" to clients.

The institution has disclosed a fig of different investigations, including probes by the SEC and FINRA into whether institution employees traded successful beforehand of a Robinhood's restrictions connected transactions of GameStop and different equities astatine the tallness of the retail trading frenzy successful January.

Bear marketplace concerns

A bigger chartless whitethorn beryllium the platform's destiny erstwhile the banal marketplace nary longer sees steadily climbing equity values arsenic it has successful caller months.

"How is their level going to respond and however is their lawsuit basal going to respond erstwhile determination is simply a carnivore marketplace and things are not truthful easy?" asked Briefing.com expert Patrick O'Hare.

More questions situation Robinhood's efforts to expand, including the anticipation of offering status accounts which are a large concern for incumbent fiscal giants, galore times the size of the upstart.

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© 2021 AFP