300,000 Robinhood users bought the company’s stock when it went public. What does that say about the app?
Robinhood stock trading platform made headlines this year for its role in popularizing meme stocks (stocks that have skyrocketed in value due to coordinated buying efforts by retail investors), including GameStop and AMC.
So it only seems fitting that one of the main tools used by most of these investors got the meme stock treatment itself.
Robinhood launched its own initial public offering (IPO) on July 29, with an opening price of $ 38 per share. As part of that launch, the online broker, which advertises itself as “bringing the trade to the masses”, planned to make up to 35% of its original stock available to its own customers.
Though the launch itself had its ups and downs, Robinhood announced on its app that 301,573 of its users took part in its IPO – more than enough retailers to give it true meme stock status.
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Only 1.3% of the funded accounts are invested
On the surface, the number 301,573 may seem like a lot – and maybe it is. There isn’t exactly a ton of historical data points on how many retailers are investing in online brokerage IPOs, so it’s hard to put them into context.
Additionally, we don’t know how much of the stocks sold were actually bought by users. The company wanted to set aside 20-35%, but it hasn’t yet said how much of it users bought.
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The whole shtick of Robinhood consists of things like low-threshold investment accounts and fractional trading (buying part of a stock instead of having to buy a whole stock). So it’s hard to imagine the typical user spending millions (or even thousands) on Robinhood stock.
While this angel number 301,573 represents a significant amount of money invested, it may not represent many of the app’s customers. Robinhood is said to have around 22.5 million funded accounts. That means that 301,573 investors represent only 1.3% of the potential user base.
Again, we can’t be sure if that’s historically good or bad as there isn’t a lot of similar data to compare. But 1.3% doesn’t sound quite as impressive as 301,573.
It’s a bumpy road to get here
Assuming a 1.3% turnout is not a good sign, it could be the result of Robinhood’s tough year – including recent legal troubles. In addition to facing a significant number of class action lawsuits from disgruntled customers, the company has just received a historic FINRA fine for non-compliance.
And its IPO had its own share of drama. While the stock (trading as NASDAQ: HOOD) opened at the lower end of its range at $ 38 per share, it was down 8% on day one.
Robinhood stock wouldn’t close above its opening level for the following week. Then the stock exploded in true meme-stock fashion, jumping 60% from one day to the next. The stock was trading above $ 80 per share at its peak.
Since then the stock has trended downward, closing lower than it opened each day. However, it remains 30% higher than its opening price.
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Is a dedicated core enough?
As much as we can read in the number of users who invested in the company’s initial public offering, it’s hard to pinpoint what this actually says about Robinhood itself.
On the one hand, it could indicate a dedicated core of users who believe in the company’s future. And the app has steadily gained new users every year, more than 4 million added this year alone.
But, if anything, the steady growth in users may make the small percentage of investors even more worrisome, as it could suggest that the vast majority of its customers are suspicious of Robinhood’s current troubles. Either way, it will be interesting to see where the stock ends up when that meme-stock-like volatility finally settles down.