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Quote of the Day
“Robinhood trades are not free. You pay for order flow. You’re probably charging your
customers more and pretending to be free. It’s a very dishonorable, low grade way to talk,
and nobody should believe that Robinhood’s trades are free.”
– Charlie Munger, in the 2021 DJCO shareholder meeting. (Source)
July 29, 2021: Robinhood IPO Debuts During Meme Stock Frenzy
The retail trading boom of 2021 peaked with the IPO of Robinhood Markets (Ticker: HOOD) – the commission-free trading app at the center of the “meme stock” phenomenon that took off during the 2020 pandemic.
On July 29, 2021, Robinhood went public on the NASDAQ, and started trading at $38 per share. This gave the company a market cap of about $31 billion.
The debut came amid both massive hype and significant controversy: Robinhood had faced public anger for temporarily restricting trades in GameStop and other meme stocks during the January 2021 frenzy, and there were regulatory questions around its “payment for order flow” revenue model.
After listing, Robinhood’s stock had a choppy start – shares fell as low as $33.35 on the day. The share price would recover and be very volatile until October, when prices would crash. It would take more than 3 years for the share price to get back to their IPO price:
Reads of the Day
The IPO Playbook by Steve Cakebread
Written by the former CFO of Salesforce and Pandora, this book dives into what makes an IPO successful and what pitfalls to avoid. It’s especially useful in understanding why some IPOs flop despite hype, like Robinhood’s initially did.
This book provides insider details of how the IPO market works, and also provides insider context for evaluating whether the hype around an IPO is justified, and how structure (like offering IPO shares to retail) can alter outcomes.
How Robinhood and its Band of Merry Retail Investors Emerged to Thrive on Wall Street
This piece examines Robinhood’s much-anticipated July 29, 2021 IPO and its aftermath, highlighting how retail investors powered an extraordinary post-IPO rally. It notes that Robinhood made an unprecedented move to allocate 20–35% of its IPO shares to its own users, with over 301,000 customers buying in. Initially lukewarm, the stock soon surged over 70% within a week, halted for volatility as social-media-fueled traders turned HOOD into a meme stock.
This article is a great complement to the Robinhood IPO event, as it provides insight into IPO dynamics in the era of meme-stock euphoria and retail investor behavior – showing how “democratizing finance” can amplify market swings.
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