Robin Hood made an unusual start to Wall Street on Thursday after the fast-growing online trading app grossed 1. 9.9 billion in initial public offering, falling sharply in its Nasdaq debut. ۔
Tucker “HOOD” traded down 8.4% at .8 34.82 after entering the market at .8 38.8.
The Silicon Valley firm, started by two friends who met at Stanford University, has billed itself as an accessible and recreational platform for young and first-time investors during the Corona virus epidemic. Of external development.
But the company, now valued at about 29 29 billion, has also raised doubts about its business model and criticized key regulators for its approach.
CNBC observers overseeing the IPO called the offer “polarizing”, with both sides voicing out loud in the investment community.
“The brand Robin Hood really stands out for this next generation of consumers,” Vladimir Tenev, the company’s chief executive, told the network.
The company had allotted 20 to 35 per cent shares to consumers in the initial offer, which is an unusually large share for individual investors. But Tenef refused to provide a level of participation.
Founded in 2013 by Tenif and Baiju Bhatt, Robin Hood has served as a niche for vulnerable “everyday people,” according to one prospectus, smaller and more diverse. The average Robin Hood customer is 31 years old.
Using the app, individual investors played a role in the so-called “Reddit Uprising” earlier this year when retail investors on social networks launched GameStop and BlackBerry to fight institutional investors. Like Pete joined forces to help Down Stock.
Following rapid growth during the epidemic, the company doubled the number of user accounts to 18 million at the end of March, with 81 81 billion in assets under its control, compared to the same at the end of 2019. .2 14.2 billion.
The firm, whose commission-free stock trading model has been imitated by some competitors, aims to attract more customers, provide additional financial services to consumers as they amass wealth and expand internationally. Will do
Tenef highlighted cryptocurrency trading as another area of growth, telling CNBC that trading on digital currency is “potentially a catalyst for international expansion in certain markets.”
But Robin Hood’s rise to prominence has not been without controversy.
Last month, shortly before the company submitted its papers to go public, it agreed to pay a 70 70 million fine to regulatory body Finra to settle the allegations, which it said were “false and misleading” communications. And other mistakes hurt thousands of users.
And the company has found itself in the crosshairs of the US Securities and Exchange Commission (SEC) and its chief Gary Jensler, who have taken aim at their business model.
Although Robin Hood does not receive consumer commissions, it does collect taxes from other financial companies while doing business with these companies, known as “Payment for Order Flow” which is banned in other countries, including the UK and Australia. ۔
Gansler said such arrangements raise questions about conflicts of interest and also enable firms to trade consumer data.
Tenev defended the practice, saying it “led to a much greater (different) participation in the markets”, although he acknowledged that it could be a “better explanation” for clients.
The company has unveiled a number of other investigations, including an investigation by the SEC and Finra into whether the company’s employees were involved in the rise of retail trading frenzy in January before Robin Hood’s ban on game stops and other equity transactions. They used to trade.
Even more unknown may be the fate of this platform when the stock market no longer looks like the rapidly rising equity values as it has in recent months.
“How is their platform reacting and how is their client reacting when there is a bear market and things are not so simple?” Asked Patrick O’Hare, an analyst at Briefing.com.
Further questions surround Robin Hood’s efforts to expand, including the possibility of offering retirement accounts, which is a big business for future financial giants, starting multiple times.
Copyright AFP. All rights reserved.