Fintech Today - FTT+ Special: From $HOOD to $HODL

​

Hi guys! Charley and Julie here for a special edition of FTT+ covering Robinhood’s first day of trading.

While a lot of us thought $HOOD would skyrocket in its debut, it was actually pretty boring. It started last night when shares priced at $38, the lower end of its projected range. The stock then opened at $38 (a $32B valuation), and then moved lower (by as much as 12%) before ending the day at $34.71. This means that all of those Robinhood users that got somewhere between 20-30% of the IPO allocation are now sitting on paper losses (unless they broke the rules and sold...which is very possible). The penalty for selling before 30 days are up is simply being restricted from buying shares in IPOs for 60 days, soooo, not that much of an incentive.

It reminded us a lot of Facebook’s first day of trading in 2012 (damn we feel old). Ironically, Facebook also priced at $38, had a large share allocated to retail, and moved lower after its debut even though people thought it would soar. Of course, Facebook also had a bunch of glitches in its open, of which Robinhood was spared from, but it was more than a year before Facebook shares rose above their IPO price again.

You know who's not sitting on paper losses though? VCs. Not just those that bet on its seed round either. Remember when it had to raise a ton of money overnight earlier this year when Gamestop was going crazy? Well, those 2021 Tranche notes paid back big time. Here’s the gist of it:

In February 2021, Robinhood issued two tranches of convertible notes, consisting of $2.53B aggregate principal amount of Tranche I convertible notes and $1.02B aggregate principal amount of Tranche II convertible notes. These notes automatically converted into common stock at the IPO at a conversion price equal to the lower of (i) 70% of the cash price per share paid by investors in the IPO offering and (ii) $38.29 (in the case of the Tranche I convertible notes) or $42.12 (in the case of the Tranche II convertible notes). Well played, Ribbit.​

In true Robinhood, meme stock fashion, we’ve also been keeping an eye on r/WSB, and there just hasn’t been that much discussion or attention given to Robinhood interestingly enough. The general consensus on Reddit and Stocktwits in regards to Robinhood continues to be quite negative, so there hasn’t been a similar meme-fication of the stock that people might have been expecting all Gamestop and AMC. It’s still going to take a long time to repair the Robinhood brand amongst a certain subsect of active retail traders...although those are the ones that ironically probably continue to use Robinhood the most!

Someone who's also keeping a close eye on these meme stock channels is SEC Chair Gary Gensler, who decided to send out a fun tweet for Robinhood’s debut:

This tweet summarizes a lot of what might be keeping some people from investing in Robinhood. What happens to the future of payment for order flow? If that goes away, what happens to Robinhood’s business? On top of that, there’s an argument to be made that Robinhood’s best year is behind us. That might be why Vlad and the rest of the executive team have been stressing that it’ll be branching out beyond trading and investing (and has already started to). In an interview with Andrew Ross Sorkin on CNBC prior to him ringing the bell, Vlad said that in five years, “We want Robinhood to be the most trusted and most culturally relevant money app worldwide.”

For those hoping to make a lot of money on their shares, they should hope that Vlad succeeds in that wish. The team definitely nailed the transformation in trading, so it’ll be interesting to see if they nail future consumer behavior changes when it comes to finance.

Share Fintech Today, get exclusive rewards! Have friends who'd love our newsletter too? Give them your unique referral link (below) and get an awesome reward when they subscribe. https://sparklp.co/d848d352 PS: You have referred 0 people so far ⚡️ Powered by SparkLoop

Charley Ma is currently GM of Fintech at Alloy, where he focuses on the go-to-market strategy for the fintech vertical. Prior to Alloy, he was head of growth at Ramp. Previously, he was the first growth hire at Plaid, where he started its fintech sales team and opened the NYC office prior to the announced exit to Visa for $5.3B. Charley is also an active angel investor in fintech + developer infrastructure and enjoys a good tweet.