Robinhood went public that Thursday, and the long-awaited listing was basically a bust. The public company rated its IPO at the bottom of its expected range, and its stocks then fell more than 8% before the market closed. It was the worst first day of trading ever for a company that raised such a large pool of capital when it went public, according to Bloomberg.
We can look back on that day in years and laugh as we did on Facebook’s “disappointing” public debut in 2012. In a broader context, Robinhood’s IPO and $ 30 billion valuation could be a positive move. But the company fell far short of the numbers that had been whirled around in recent months – even after its share price rose 6% on Friday, which made up some of Thursday’s losses.
If private investors ever get the serious chance to invest directly in a large IPO, it will be a flop. Robinhood is rightly associated with the rise of another style of trading where sentiment can be as important to a company’s stock price as fundamentals. But this week, at least, that feeling wasn’t going in Robinhood’s direction.
Robinhood’s IPO may have been a disappointment, but it still turned co-founders Baiju Bhatt (left) and Vlad Tenev into billionaires.
Even among the billion dollar companies that debuted on Wall Street this year, Robinhood is an exception. It’s the type of startup that was supposed to define the word “unicorn” before it became a cliché. But this week Robinhood was no exception. Because it was one of at least half a dozen companies that had encountered serious headwinds in the past seven days on Wall Street – a sign that the tide could turn in a historically hot market this year, which is already a new decade heralds – high for the annual IPO activity with July hardly in the books.
Yes, we may look back at Robinhood’s disappointment and laugh at some point. But we could also soon see it as the moment when the wide-open IPO window for 2021 began to close.
Car battery maker Clarios International has postponed a public debut scheduled for this week due to market volatility. Advertising technology provider Teads did the same for the same reason. Together, the two companies had hoped to raise more than $ 2.5 billion.
Earlier this week, the fruit giant Dole cut its planned IPO and cut $ 600 million from its hoped-for valuation. When the company debuted on Friday, its stock slipped another 9%, bringing its market cap to about $ 1.3 billion – a 44% drop from its valuation it was targeting a week ago.
MeridianLink (which develops lending software) and Snap One (a consumer electronics retailer) both saw share prices fall on its first day of trading after private equity-backed debuts this week. And China’s ongoing crackdown on foreign IPOs has crippled another pipeline to Wall Street, while also causing serious price falls for many Chinese companies that recently went public in the US – most notably ride-hailing company Didi Global.
Some companies are still making successful public debuts. PowerSchool, Traeger and Duolingo all experienced healthy pops on the first day this week. Robinhood and the other troubled debutantes this week could reasonably be viewed as slip-ups. After all, IPOs will always be a mixed bag.
But there is reason to believe that this is part of a larger trend. The Financial Times wrote about how the size of its initial public offerings dropped significantly between Q1 and Q2. Nelson Griggs, president of Nasdaq, predicted a slowdown in the IPO in an interview with Bloomberg this week: “I think there’s a reason investors are getting a little tired right now. … A reason to speak for a little break. “
Then there’s the simple fact that most of the companies that made the biggest IPOs to date in 2021 have done poorly since their debuts. Coinbase and Bumble stocks are down about 28% since trading began. Affirm is down 42%. The TuSimple share has fallen by 8% since it went public and by 42% since the beginning of July. Oscar has lost more than half of its value. Marqeta and UiPath have also seen significant slides.
Here, too, there are exceptions to the rule. Roblox and Procore have both increased in value since going public. But when it comes to assessing the post-IPO fates of the biggest listings of the year, the bad outweigh the good.
It’s been a record year for IPOs so far, and as long as the stock market is up, it will be a bit shocking when the debuts completely dry up. But more than many other aspects of Wall Street funding, the IPO market is an exercise in crowd psychology – a game based on numbers and data, for sure, but mood and mood too. It’s an arena where headwinds can sometimes switch without warning and for no apparent reason.
It seems like every company that has even considered going public has sprinted to Wall Street in the past few months to capitalize on the post-pandemic bull market. But if things get tougher as summer ends, Robinhood’s disappointing debut could mark the beginning of the end of the 2021 IPO boom.