Robinhood Markets (NASDAQ:HOOD) finally made its public debut this week, and made headlines for all the wrong reasons. The stock was down more than 4% for the week as of 10:30 a.m. EDT Friday after a rocky start on public markets.
Robinhood is a disruptor in the brokerage business, launching in 2015 with an app that featured commission-free trading and a simple interface designed to attract market newcomers. The company has definitely made its mark, all but forcing most of the larger, more-established brokerages to cut commissions and rethink their mobile interfaces.
But the company has also attracted a fair amount of controversy. Critics accuse Robinhood of "gamifying" investing, potentially costing rookie investors who don't fully understand what they are doing a lot of money. Robinhood was also caught up in this year's meme stock frenzy, and almost was overwhelmed by the flood of buy and sell orders and options orders for stocks including GameStop and AMC Entertainment Holdings.
Robinhood went public on Thursday, July 29, selling shares for $38 apiece, but the stock promptly fell nearly 9%. It was the worst debut on record among the 51 U.S. companies of its size or larger, according to Bloomberg research. Though the shares rebounded somewhat as the day went on they remained well below the offering price.
Even after the decline, Robinhood is still priced for growth. The company's market capitalization is higher than the much larger Interactive Brokers Group. In the quarters to come Robinhood is going to have to show it can continue to attract new users, and retain the ones it already has, even as other brokers have adopted some of its most innovative features.
It's possible Robinhood will do just that, but given the ups and downs it experienced prior to joining public markets it is hard to imagine it will be a straight shot higher. Investors are likely wise to be patient and watch how this IPO develops.