Robinhood drops 12% in volatile public-trading debut after IPO valuing it at $32 billion

• Robinhood whipsawed in its trading debut on Thursday, with shares initially jumping 6% before falling as much as 12%.
• The online trading app was valued at $32 billion when it priced its IPO at $38 per share on Wednesday.
• Robinhood raised $2.1 billion from its IPO and allocated a portion of shares to its user base.
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Online trading app Robinhood whipsawed in its post-IPO debut on Thursday, with shares climbing 6% before falling as much as 12%. Shares hit a high of $40.22 before falling to a low of $33.60.

The company priced its IPO late Wednesday night at $38 per share, representing the bottom end of its targeted range of $38 to $42 per share. The IPO raised $2.1 billion for the company and gave it a valuation of $32 billion.

Robinhood last raised $3.4 billion earlier this year, with shares trading on private secondary markets at a valuation around $40 billion. The company raised the money amid a surge in retail trading in meme-stocks like GameStop and AMC Entertainment.

The company has seen explosive growth amid the COVID-19 pandemic and government stimulus checks, with millions of Americans becoming first time investors in the stock market. Robinhood has more than 18 million accounts and 17.7 million active monthly users.

While the brokerage firm is not yet profitable, the company saw revenue grow 245% to nearly $1 billion in 2020. That revenue growth accelerated in the first quarter of 2021, surging 309% to $522 million, according to its S-1 filed with the SEC last month.

Much of that growth is coming from options and crypto trading, two highly speculative areas of markets than often lead to either big losses or massive fortunes.

Unique to Robinhood's IPO is the company's decision to allocate up to 35% of its IPO shares to users of its app. Retail investors are often restricted from investing in IPOs at the pricing afforded to institutional investors.

While Robinhood's IPO represents a big milestone for the company, there is still a long way to go before co-founders Vlad Tenev and Baiju Bhatt can cash in on their hefty compensation awards. Both founders will be awarded $1.4 billion if Robinhood's stock price reaches $101.50 by 2025.

Robinhood trades on the Nasdaq under the symbol "HOOD."

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