The Robinhood logo is displayed on an iPhone
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Robinhood Markets rose 5.1%, to $36.95, around midday on Monday, nearly rebounding to its initial public offering price of $38.
Among the positive pieces of news for the company is that Cathie Wood of ARK Investments bought 1.3 million shares on Thursday, the day of the offering. And the company said in a notice on its app that 301,573 of its users—or 1.3% of the people who have funded accounts — had bought into the IPO.
That number, though, doesn’t reveal how much of the offering went to the firm’s customers, who were expected to be allocated as much as 35% of it. Robinhood (HOOD) didn’t release the total number of shares that retail traders bought. Some experts said that the stock’s first-day decline of 8% means that companies will avoid allocating so much to retail traders in the future.
For the next few weeks, Robinhood’s fate is in the hands of those retail investors. Until the company reports its second-quarter earnings — on a date that has not yet been released — there will be an information vacuum that could keep the big money out of the stock. Even when those earnings are released, they may not move the stock much because Robinhood already previewed them in a securities filing last month. It will be weeks before analysts working for banks that underwrote the IPO (which includes just about every major bank on Wall Street) issue reports on the stock. It may not be clear until the third quarter if Robinhood can keep its momentum when trading volume slows.
The natural ebb and flow of the market is likely to take a while to kick in. Banks that underwrote the shares are prohibited from lending them to short sellers for 30 days, so shorting the stock could prove difficult early on.
Big institutional investors who have been interviewed about the IPO have said they are not yet comfortable with the company’s growth story and risks, and may need more time to see if Robinhood can hold up as market volume declines.
In the interim, retail investors will loom large in the stock’s day-to-day gyrations. The company told investors on its platform that if they sell the stock within 30 days, they would be restricted from using its IPO Access platform to buy other IPOs for two months. The stock’s success may depend partially on whether they do as they’re told.
Write to Avi Salzman at [email protected]
