Robinhood spoons up taste of own medicine

The logo of Robinhood Markets, Inc. is seen at a pop-up event on Wall Street after the company's IPO in New York City, July 29, 2021. REUTERS/Andrew Kellyfounder Vlad Tenev: What happens to a company’s shares the day of an initial public offering says little about what happens later. The share price of Tenev’s digital brokerage fell around 8% on Thursday from its $38 launch price a day earlier, already set at the bottom of the range.

Valuation is particularly complicated at Robinhood. Customers are suing for various perceived slights, a watchdog wonders why Tenev isn’t officially registered as a financial adviser, and Robinhood’s commission-free model is being scrutinized by regulators. Tenev also planned to allocate up to 35% of the company’s shares to customers. That’s not a bad thing and may have made the IPO pricing more accurate, but it is experimental enough to keep some investors at bay.

Robinhood in any case raised $2 billion or so, which subsequent share price moves can’t take away. The snag is that there may be a feedback loop between Robinhood’s stock price and its future ability to generate cash. If markets appear to cool down, so will its mainly retail customers, who have grown accustomed to the value of their investments going up. In one ominous sign, battery maker Clarios International on Thursday postponed its own float.

All this is not without a silver lining. Robinhood’s market capitalization was around $29 billion by Thursday’s close, suggesting underwriters Goldman Sachs

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