Updated Jul 29, 2021 - Economy

Robinhood stumbles out of the gate

Data: YCharts Chart: Axios
Data: YCharts Chart: Axios

Robinhood, the company that was founded to disrupt Wall Street, was taught a painful lesson by Wall Street investors on Thursday.

Why it matters: Robinhood attempted to revolutionize the initial stock offering by allocating a large number of shares to its own small-dollar investors. Those investors are now sitting on a significant loss, even as Robinhood's multibillionaire founders both sold about $50 million of shares at the IPO price.

By the numbers: After trading for most of this year on private secondary markets in the $50 to $60 range, per Pitchbook, Robinhood stock was eventually priced late Wednesday at $38, the bottom of its bankers' previously indicated range.

  • Once they started trading, the shares fell as much as 14% intraday before closing down 8.8% at $34.66.

The big picture: Robinhood made a last-ditch attempt to paint itself as more than just a brokerage.

  • CEO Vlad Tenev told the AP he aspired to move into payments, competing with the likes of Square to become the only app that people use on their phones for money. (At its current valuation of $117 billion, Square is roughly four times the size of Robinhood.)
  • When asked by AP what the company will look like in the future, Tenev said: "Over time, we want to be the single money app, the most trusted and most culturally relevant money app worldwide."
  • Investors were underwhelmed. While the concept of a "super-app" worked in China, where there were fewer embedded incumbents, it's much harder to see any one app dominating the finance space in America.

The bottom line: Robinhood, which is unprofitable, has yet to convince the public markets that it can achieve its dreams of dominating tomorrow's financial services landscape.

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