The Robinhood IPO was the most talked about deal last month. We catch up with an investment expert to find out why investor participation took off like this and what it means for other ‘meme stocks’.
With recent data revealing that Robinhood shares are the sixth most purchased stock and eleventh most traded security on retail platforms, now is the time to take a look back at the Robinhood IPO.
With this in mind, Maxim Manturov, head of investment research at Freedom Finance Europe, delves deeper into the Robinhood IPO, why investor participation took off at such an unprecedented rate and the future outlook for this company.
“In late July, Robinhood’s IPO went live and according to data compiled by Vanda Securities Pte, retail investors bought $19.4 million worth of Robinhood shares, making it the sixth most bought share and the eleventh most traded security on retail platforms. It was also the best-selling company on the Fidelity platform, with more than 32,000 purchase orders from customers, nearly twice as much as AMC Entertainment, which had the second-highest number of purchases. But still many financial commentators believe the IPO was a lacklustre event,” explains Maxim.
Who invested in the IPO?
“Robinhood’s sharp rise in its trading came after the news that the ARK Fintech Innovation ETF initially bought 89,622,000 shares. In addition, Markets.businessinsider.com notes that Robinhood shares were the most mentioned shares on the Reddit Wall Street Bets forum. They were also the most mentioned on SwaggyStocks, with more than 1,700 references, while AMD, the next most discussed company, generated only 388 mentions in the forum. In just two days, the shares rose by 86.57%.”
A meme stock?
“The company was listed as a “meme stock,” however, the main difference from other “meme stocks” is that Robinhood shares did not rise on the back of a short squeeze; the growth here was due to options trading. According to the Wall Street Journal, citing data from Cboe Global Markets, the day after Robinhood went public, the most popular options were calls with a strike price of $70.”
Read more: Know your 2021 meme stocks…but buyer beware
What does the future hold?
“Robinhood is looking to expand at a rapid rate and has already announced it is acquiring the online shareholder communications platform, Say Technologies, for $140million, just weeks after its IPO. Purchasing another company after going public isn’t unusual. You only have to go as far back as to 2012 when Facebook acquired Instagram for $1billion, shortly after the social media platform went public.
Like Robinhood, Facebook did not have the best start following its IPO and while it struggled at first, Facebook is now considered one of the most dominant forces in the technology sphere.
“It should be noted, however, that Robinhood is attempting to become a leading force in a heavily competitive, dominant market and to come out as the leader over the course of the next decade, Robinhood needs to ensure it capitalises on the growing surge of young retail investors,” concluded Maxim.