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Robinhood’s initial public offering comes at a critical time in the post-pandemic tech IPO boom. With high profile failings like Deliveroo and slumping stock values belonging to recently listed companies like Coinbase, it may be up to the online brokerage platform to breathe new life into the market.
The timing of the listing is significant when shares of rapidly growing companies are beginning to fall out of favour among investors – with many newly listed firms falling below their IPO prices. According to a recent Wall Street Journal article, the market jitters that have swept across the market have led to ‘at least three companies’ postponing their IPOs.
Following the hazardous listings of Deliveroo and Coinbase in recent weeks, investors sought salvation in the form of Squarespace and Oatly’s IPOs. With both companies trending slightly higher than their IPO prices, it forms a solid foundation for Robinhood’s much-speculated debut. If another stuttering flotation enters the market, it may carry steep consequences for an IPO market punctuated by uncertainty.
Eddie Molloy, co-head of equity capital markets for the Americas at Morgan Stanley, said: “Volatility makes deals more harrowing to launch. Ultimately what we’d like to see is stability in the markets and see deals perform and hold their performance. Investors making money off of the latest deal is always helpful for the next deal.”
(Image: TechMonitor)
As TechMonitor data shows, Robinhood weighs in considerably higher than its struggling debutants in Coinbase and Deliveroo respectively. With the two biggest entities on the chart above, Stripe and Instacart, yet to go public, it’s likely that Robinhood’s early performance will be significant in telling investors exactly where the IPO boom is in terms of sentiment.
Building on a Record-Breaking Year
Robinhood’s listing comes off the back of an excellent year for the brokerage app and IPO investments alike.
(Image: Financial Times)
As we can see from the table above, IPOs in 2020 reached levels that haven’t been seen since 2007, showing that the investment landscape has been thriving despite the impact of COVID-19.
(Image: Bloomberg
The parallels between the recent IPO boom and the rise of Robinhood’s usage are intriguing. With retail investors using the app to buy and sell shares over the course of the pandemic, the number of daily active users spiked in early 2021 in the wake of the GameStop saga, in which investors joined forces to implement a short squeeze on shares in GameStop stocks.
Explaining the rise of both Robinhood and the wider IPO market over the course of the past year, Maxim Manturov, Head of Investment Research at Freedom Finance Europe claims that “the pandemic supplied additional reasons for the retail investment market to grow. To support the economy, most countries adopted stimulating policies, which brought both the loan and deposit interest rates to historic lows.”
“As an alternative to low-rate deposits, many started investing their savings into stock markets, which posted significant gains last year despite the lockdown and the production slump,” Manturov added.
Despite a nervy few weeks, US-listed traditional IPOs have raised $34.9 billion so far in 2021 alone – almost five times what was raised throughout the same timeframe in 2020. This makes it the most lucrative point for any year since 1995.
In terms of first-day pops, US-listed IPOs are reaching 44% – the highest since the dotcom boom at the turn of the century. This means that, if momentum is able to carry on throughout the year, 2021 will break a multitude of records.
Engaging Directly With Retail Investors
Perhaps the most significant development in Robinhood’s preparations to launch an IPO come from the news that the company’s planning to make its shares available to individual retail investors prior to its flotation.
This move appears to be an intentional acknowledgement of Robinhood’s user base – which consists largely of amateur investors looking to buy into stocks that interest them.
In an IPO market that’s often reserved for large institutional investors with deep pockets, Robinhood’s move may inadvertently help to kick start new interest in initial public offerings among a larger pool of smaller investors.
As part of their plans, Robinhood is also rolling out IPO Access – a platform that will help retail investors to buy into IPOs of companies before they go to market.
Whether Robinhood’s lofty plans culminate in a successful initial public offering remains to be seen, but in making IPOs more accessible to all investors, the brokerage app might just be helping to keep momentum rolling in a market that’s beginning to look a little more jittery.
