Robinhood IPO Called ‘One of the Worst’ As Stock Crashes

Mandatory Credit: Photo by Omar Marques/SOPA Images/Shutterstock (12769993l)In this photo illustration, a Robinhood logo is displayed on a smartphone with stock market percentages in the background.
Omar Marques/SOPA Images/Shutterstock / Omar Marques/SOPA Images/Shutterstock

Robinhood’s stock is crashing following the company’s fourth-quarter earnings Thursday, Jan. 27, which forecasts a grim first quarter of 2022, as it anticipates that total net revenues will be less than $340 million — a  35% decline compared to the first quarter of 2021, according to the financial report.

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The stock tumbled 15% following the earnings report, and was down 8% on the morning of Friday, Jan. 28, which prompted Bloomberg to call it “one of the worst IPOs since the start of the pandemic.”

“Robinhood Markets Inc. shares are in a tailspin and that’s making them the worst high-profile global stock market debut since the onset of the pandemic, just edging past China’s Didi Global Inc. and London’s THG Plc,” Bloomberg reported.

The company started trading on NASDAQ under the ticker “HOOD,” in July 2021.

Peter Cohan, a senior lecturer at Babson College and author of “Goliath Strikes Back,” told GOBankingRates that last July, he urged investors to avoid Robinhood’s IPO.

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“After peaking at $85 during its first week, the stock has since plunged. After a drop in revenues and bigger than expected losses, the company has not solved the basic problem I saw when it went public,” Cohan said. “It remains too dependent on crypto trading; rivals have copied its fee-free trading, and meme stocks are no fun anymore. Short sellers have profited handsomely and I see no reason for them to cover their positions now.”

In addition, Robinhood’s monthly active users fell to 17.3 million last quarter from 18.9 million in the third quarter, according to the filing, while average revenues per user (ARPU) for the quarter also decreased 39% to $64 on an annualized basis, compared with $106 in the fourth quarter of 2020.

“The decrease was primarily related to lower trading volumes per user for options and equities and lower interest earnings per user from securities lending due to declines in market rates earned on loaned securities, partially offset by higher trading volumes per user for cryptocurrencies,” the filing reads.

For 2022, Robinhood said it will build products intended to help with long-term investing, “aiming to make it easier for customers to build for their futures no matter where they are in their financial journeys,” according to the filing. The company added that it will invest in spending and savings products and, in the coming months, will introduce a new experience for day-to-day spending to help customers build a portfolio as an outcome of spending.

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“Robinhood plans to offer customers ways to move their money faster, starting with introducing instant debit card deposits and withdrawals in the next few months,” according to the filing. 

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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