Robinhood’s IPO is here. Will going public be a new memetic stock?

Robin Hood Help usher in the latest Intraday trading wave. Now, the company is about to understand how far it can go.

The free trading app began public trading on Thursday, as part of its initial public offering, and its shares are priced at $38. It is a long and winding road for Robinhood to reach here. Founded in 2013 and launched in 2015, the app is the key to the rise of commission-free stock trading.It has also been the subject of important review, including worrying about it Make trading feel too much like a game, Push people to too many risks, and use a business model—— Order flow payment -This hides the actual cost of the transaction.Robin Hood raised his eyebrows Temporarily restricted Earlier this year, on some emoji stocks-which means stocks that seem to have become super popular online overnight-and found themselves in Game stop saga.

Although it is not clear whether Robinhood will become a memetic transaction with companies such as GameStop, AMC, and even Dogecoin, part of its publicity is aimed at the meme-trading crowd.Before the IPO, the leaders of Robinhood participated in a Virtual roadshow Promote the value proposition of the stock to potential investors, and will surely let users know that it is going public via emails and alerts on the app. The company also stated that it will reserve 20% to 35% of the IPO shares for Robinhood users, who have opened about 22 million accounts through the platform.

“This will definitely become one of the largest retail distributions ever,” Robinhood CEO Vlad Tenev said in an interview with CNBC on Thursday. “When you hear about Robinhood’s mission, which is to democratize finance for all, it is actually available to everyone who was once reserved for 1% or very wealthy people.”

To be sure, the leader of Robinhood will not be constrained by its legion of retail investors.This How its shareholder structure is set up It will help the founder maintain more control over the company’s final decision. (Facebook has one Similar in structure This helps ensure that Mark Zuckerberg continues to host the show. ) Tenev stated on CNBC that this is to ensure that Robinhood leaders can focus on the long-term and avoid short-term distractions. From the IPO, Tenev, the first-generation immigrant from Bulgaria, worth Approximately 2.5 billion U.S. dollars on paper. His co-founder Baiju Bhatt Queuing A penny is not bad.

It seems that Robinhood is promoting financial democratization, or at least its own financial democratization, but only to a certain extent-its founder still wants to control the steering wheel. This may be because it is difficult to argue with individual investors.As CNBC’s Andrew Ross Sorkin pointed out in an interview, some companies with a large number of individual shareholders, such as Sober car, It is difficult for them to vote on the decision.

“We believe that what is important is not only the participation of retail investors, but also the dialogue between retail investors and the companies they are interested in,” Tenev said.

The initial public offering price Robinhood at 32 billion U.S. dollars, as Wall Street Journal Notes is much higher than its valuation of US$12 billion in its financing round last year. As part of the public offering, Robinhood plans to sell approximately 55 million shares, which means it has raised $2 billion. It will be traded on Nasdaq under the ticker symbol HOOD.

Safety first?

Robin Hood claims to rely on “Safety first“The mantra of putting customers’ financial health first. Given Robinhood’s past, this promise Can feel a little suspicious.

December, Robin Hood agree and support $65 million was used to settle the US Securities and Exchange Commission’s (SEC) allegations that it misled customers in terms of how to make money and the cost of dealing with the company. Most of the scrutiny surrounding Robinhood has focused on its business model, which uses a method called order flow payment, in which large market makers such as Citadel Securities and Virtu pay brokers like Robinhood to process transactions, which in turn Possibly from the spread, that is, the price difference between buying and selling. This is how many apps offer “free” transactions, even though transactions are not really free. Gary Gensler, Chairman of the U.S. Securities and Exchange Commission Say He plans to investigate Model.

“This is what allows Robinhood to do what they do,” said Tom Gorman, a securities expert and partner at Dorsey & Whitney. Tell Vox Earlier this year. “It has the beneficial effect of encouraging these small investors to enter. Now, they are not getting, perhaps, the best execution in the world. They have been well executed.”

In June, the Financial Industry Regulatory Authority (FINRA) Order Robin Hood Pay $70 million for “systematic regulatory failure and significant damage suffered by millions of customers.” Among other things, FINRA found that Robinhood communicated false and misleading information to customers, including the types of transactions they can conduct and how much money is in the account, and relied on algorithms to approve option transactions, which are usually more risky than conventional investments. In June 2020, a young man in Illinois Committed suicide After believing that he lost hundreds of thousands of dollars on Robinhood.And the company is still Regulatory investigation and Face litigation.

Despite the controversy and mistakes, it is undeniable that Robinhood has achieved some huge growth: as of the end of June, users have invested approximately US$100 billion through Robinhood’s platform, and its revenue Increase In the first quarter of this year, it increased by more than 300%.Robin Hood too Provide services to different types of investors instead of more traditional brokers.As New York Times Notes, Its average account balance is 4,500 US dollars, while Charles Schwab’s account balance is 200,000 US dollars, and it is dealing with younger customers, if they stay, they may bring high profits to the company.

Meme addition and subtraction

For those who view day trading on the platform as gambling rather than investment, investing through Robinhood may be risky (no matter what Robinhood says, it’s better for the company if you trade more often than long-term transactions. ).What remains to be seen in the future is to invest in Robinhood itself will do the same.

In its S-1 filing For the IPO, Robinhood listed many risk factors. Restrictions on order flow payments and even a slowdown in trading activities may affect its business prospects. Any changes in laws and regulations — or the company’s failure to comply with laws and regulations — may also be harmful. (There is an interesting Twitter topic This is Robinhood’s S-1. ) In Massachusetts, the Secretary of State is William Galvin Prosecute Robin Hood Basically let the app be banned in the state. “They deliberately go out to attract customers and rely on their lack of experience to induce them to buy things they might not understand,” Calvin said NPRHe said that if he succeeds, other states can follow suit-this is clearly not good for Robinhood.

Currently, Robinhood seems to hope that its mission to democratize finance can bring returns to the company in more than one way. It was pushed towards cryptocurrency, trying to capitalize on some of the crypto boom this year, and has become a gateway for individual investors to enter meme stocks and trends.

Robinhood’s CEO Tenev told CNBC: “Of course, when something becomes more culturally relevant, such as a particular cryptocurrency or a particular stock, there will be some special moments.”

Robinhood profited from meme trading. It remains to be seen whether it will become one of them.

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