Like Facebook’s initial public offering more than nine years ago, Robinhood’s Wall Street debut was tepid. Despite its sluggish start, Robinhood has roared back to life over the last week. Is it possible for it to keep climbing and become the Facebook of financial services?
It’s far too early to make that decision. However, Robinhood’s stock debuted at $38, the same price as Facebook’s (FB) IPO in May 2012. Facebook is currently trading at around $361.
So far, Robinhood has been on a rollercoaster ride: the stock dropped 8% on its first day and as low as $33.25 on the second. However, it has since roared back up to more than 40% above the IPO price and is now trading around $54, with a recent high of $85 in sight.
It’s why some analysts have dubbed Robinhood a “meme stock,” despite the fact that many critics on Reddit have panned the trading platform for a variety of reasons, including a temporary ban on customers purchasing GameStop (GME) stock earlier this year.
“The platform that powered the meme stock movement has itself become a meme stock — sometimes to Robinood’s benefit and sometimes to its detriment,” said Jonathan Anastas, chairman of Alpha Esports Tech, a mobile gaming firm.
So much for Robinhood being brought to his knees by a Reddit army of “apes”? Perhaps. The company has been credited with — and chastised for — assisting in the transformation of investing into a game. However, according to Anastas, Robinhood is simply following the money.
“They appeal to a trader demographic that is focused more on emotion and momentum,” Anastas said. “Robinhood is not valued on fundamentals.”
Nonetheless, Robinhood is now a publicly traded company with a market capitalization of more than $45 billion, and it’s looking to expand quickly, much like Facebook did before it.
The platform announced on Tuesday that it will pay $140 million in cash for Say Technologies, an online shareholder communications platform aimed at individual investors.
“Like Robinhood, Say was built on the belief that everyone should have the same access to the financial markets as Wall Street insiders,” Aparna Chennapragrada, Robinhood’s chief product officer, wrote in a blog post.
The fact that Robinhood is looking to make an acquisition so soon after its IPO is similar to a big deal Facebook made in 2012, just before it went public: Facebook paid $1 billion for Instagram, a deal that some thought was too expensive at the time.
The fact that Robinhood is looking to make an acquisition so soon after its IPO is similar to a big deal Facebook made in 2012, just before it went public: Facebook paid $1 billion for Instagram, a deal that some thought was too expensive at the time.
Facebook, like Robinhood, struggled to gain traction early on. In fact, it was an even bigger IPO flop, with shares plunging nearly 50% below their IPO price in the first few months of trading before finally bottoming out.
But it was Facebook CEO Mark Zuckerberg who got the last laugh. Facebook’s acquisition of Instagram helped it become a bigger player in mobile, allowing it to attract even more of the young users that advertisers crave. After nine years after “failed IPO”, Facebook is now worth more than $1 trillion.
