The online trading platform Robinhood Markets Inc (NASDAQ:HOOD) has started trading today with shares priced at $38. It is one of the most anticipated initial public offerings in 2021, prompting experts to warn over company value.
Would The Stock “Break The Print”?
Certified financial planner Douglas Boneparth, president of Bone Fide Wealth in New York, told CNBC: “There’s the potential for a lot of volatility with an IPO as the market sorts out what the real value of the company is.”
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With $38 per share, the company went public at the lower end of its target range.
Experts say that Robinhood’s IPO is unlike any other as it reserved 20% to 35% of its shares for its clients. This is seen as a way of giving retail investors better access to public trading, which is often kept for richer brokerage clients and institutional investors.
In this regard, Jim Cramer said on CNBC: “If the stock breaks the print, I think that there are a lot of retail investors who don’t have more money to be able to buy. I hope that they are able to get it open in some reasonable time.”
“The momentum here is quite strong for the company, but it is an order flow company. And I don't know what happens if Commissioner Gensler decides he doesn't like order flow companies.”
Jim Cramer also said that there is “a lot of risks,” since he feels unsure of “how they really drive this price.”
“This is a very traditional deal that in some ways is playing with fire. So I don't know,” he asserted.
On Robinhood’s share allocation before the IPO, CNBC’s Leslie Picker said, “Usually you see a small proportion allocated to retail. Obviously, in the business it's in, [Robinhood] did decide to have a range between 20% and 35% of the allocation distributed to users of its platform.”
“The one thing I don’t know –and I think we’ll get a sense of this once the shares start trading– is that breakdown of retail investors versus institutional investors. Does that say something about institutional [investors] may be wanting more of the stock? Or does it say something about retail wanting less of the stock?”
Picker points to how it will all turn out when Robinhood stock starts trading. “That’s ultimately what is nice about IPOs … You do have a sense of whether it worked or didn’t work, based on what the stock does today.”