Should you invest in Robinhood’s IPO?
Robinhood has filed the prospectus for its highly anticipated listing. Here are some considerations for traders to note ahead of the initial public offering (IPO).
- Robinhood Markets, Inc. filed its IPO prospectus with the US Securities and Exchange Commission on Thursday (01 July 2021)
- The platform is reportedly planning to allocate up to 35% of IPO shares to existing users
- The move comes just as the company launched its 'IPO Access' service
- Market observers pointed out a few potential risks relating to the company’s recent financials
- Interested to trade the Robinhood IPO before the listing? Open an account with us to get started today.
Robinhood IPO: What’s the latest?
Robinhood is reportedly planning to set aside between 20% and 35% of its upcoming IPO shares through its own platform to existing customers.
This allocation is much larger than the typical IPO, according to The Wall Street Journal.
The move also looks to be on brand for the online brokerage, which prides itself on ‘democratising finance for all’.
In line with this mission statement, the company recently began to promote a new service called 'IPO Access'. The service seeks to make IPOs, which have traditionally been reserved for institutional investors, more accessible to retail traders.
IPO Access will allow registered users to buy into shares of companies at launch prices, with no minimum amounts required. However, the service is still currently in the beta stage, and is only available to randomly selected users for the moment.
What should retail traders know ahead of the IPO?
The company filed a preliminary IPO prospectus with the US Securities and Exchange Commission on Thursday (01 July 2021).
Market observers noted a couple of potential risks with Robinhood’s recent financial results, which were included as part of the filing.
The first has to do with how cryptocurrencies formed a significant proportion of Robinhood’s overall revenue. Roughly 17% of the platform’s sales came from cryptocurrencies in the first quarter of 2021, up from 4% in the previous quarter.
The risk factor here lies in any ‘changes in laws and regulations,’ the company itself noted in the SEC document.
‘Our failure to comply with them, may negatively impact our ability to allow customers to buy, hold and sell cryptocurrencies with us in the future and may significantly and adversely affect our business,’ it added.
Another risk that was highlighted was the ‘meme stock’ phenomena that took place earlier this year. A number of smaller US stocks, including GameStop and AMC, experienced record gains after retail investors coordinated a concerted effort to send prices soaring.
Robinhood came under fire after it controversially decided to halt trading on the two mentioned companies’ securities, along with a few others, in a bid to ensure it had sufficient funds to cover regulatory requirements and users’ trading activities.
This was a breach of its original mission statement, according to many customers who took to social media after in criticism of the decision.
Last week, the Financial Industry Regulatory Authority said it fined Robinhood US$70 million for its system outages in March 2020 that ‘caused significant harm’ to ‘millions of customers’.
Risks aside, it should be noted that the brokerage doubled its monthly users from 8.6 million in the first quarter of 2020 to 17.7 million in the first quarter of 2021.
Robinhood says it will trade on the Nasdaq exchange under the ticker symbol ‘HOOD’.
How to trade Robinhood’s upcoming IPO
Get exposure to Robinhood before and after its initial public offering (IPO) – with IG, the world’s leading Contracts for Difference (CFD) provider. Open an account with us to get started today.
Before the listing
Trade Robinhood ahead of its listing with our exclusive grey market. The price reflects an estimation of what Robinhood’s market cap will be at the end of its first trading day.
With the Robinhood grey market, you’d:
- ‘Buy’ if you think the market cap will be higher than the price indicated
- ‘Sell’ if you think the market cap will be lower than the price indicated
After the listing
Get exposure to Robinhood shares on the secondary market from its day of listing by speculating on share price movements using CFDs.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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