Robinhood shares slide more than 10% in early trading
Robinhood, the stock trading super-app that is loved by the Gen-Z, share prices fell by over 10% in early trading as the decks are prepared for its formal trading launch.
The shares were trading below $34 as of last trading reports, down from $38 which was the offer price. Even this offer price was at the lower band of what was expected. This values the firm at around $28 billion at this time, though it was expected to be valued at over $40 billion at launch. Of course, this is much better than what it was valued at during its Series G but this is indeed a disappointing and cold start to what was expected to be a bumper opening for the stock launch.
About a third of the stocks were reserved for retail traders on its own platform which means that they are going to have a nervous time deciding whether they want to hold on to the stock or whether they would r6ather sell it and buy back later, if and when the price falls more. All in all, a tough decision to make. Many factors are being attributed to this damp reception of the launch.
One of the primary reasons is the fact that the company is yet to show consistent profitability. It has been losing money for most of the time that it has been in existence though it has shown some strong revenue towards the end of last year and a part of this year as well helped in no mean measure by the increase in crypto and meme stock trading during this period. But close observers would note that this surge is likely to be temporary as the revenues from these avenues would vanish once the prices fall which means that such revenues have their ebbs and flows.
The company is yet to come up with a consistent method to boost its revenues and hence has a lot to prove. It has also been mired in controversy over its practice of halting or regulating trades made on meme stocks like GameStop due to erosion of its own liquidity then. It was also fined around $70 million for its violations by FINRA and was also forced to raise $3.4 billion as an emergency measure when it came under pressure from the GameStop trading issues. These show that its foundations are still not very strong and could be put at risk by a stock run by a set of retail or large traders and this could be putting of institutional investors from investing into it heavily as yet.