Robinhood priced its much-anticipated IPO at the low end of its target range, valuing the investing platform at $32 billion ahead of its market debut.
Robinhood will start trading Thursday on the Nasdaq after selling 52.4 million shares to IPO investors at $38 apiece, raising close to $2 billion. In its amended prospectus, it had been seeking a valuation of as much as $35 billion with an offering price as high as $42.
“The deal is still a major milestone for a company that revolutionized the way Americans invest and is enjoying explosive growth,” CNN said.
Robinhood’s revenue surged by 245% last year to $959 million as its user growth and trading volume soared. It also posted a $7.5 million profit after losing $106.6 million in 2019.
“The business has been a juggernaut. They’ve got a great platform they can build off of,” said David Weild, former vice chairman of the Nasdaq who is now the CEO of investment bank Weild & Co.
In keeping with its goal of democratizing finance, Robinhood allocated a large amount of its IPO shares to individual investors rather than limiting access to corporate insiders and powerful institutions.
“The large chunk in the hands of individual investors … has led some traders at banks that underwrite big IPOs to say it is hard to predict how the stock will open,” The Wall Street Journal said, noting that “Past IPOs in which a significant percentage of shares were allocated to individual investors have struggled.”
But Robert Le, analyst at PitchBook, said Robinhood appears to be have left some IPO money on the table in an effort to get a first-day pop in its share price.
“Robinhood is playing it safe here,” he told CNN. “There is more hanging in the balance in terms of a successful novel IPO than a couple hundred million dollars in the bank for the company.”
Robinhood is going public amid regulatory scrutiny of its use of a controversial arrangement known as “payment for order flow” to generate more than 80% of its revenue. It does not charge a commission on trades.
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