Investment app Robinhood failed to live up to expectations on its Wall Street debut. The price of the share was set at the opening at 38 dollars (almost 32 euros), with which the American company raised 2.1 billion dollars and was estimated at about 32 billion dollars. However, given the disappointing demand, that amount seems too high for the time being: at the end of the first trading day on the New York stock exchange, the price closed at $ 34.82, almost 8.4 percent lower than the opening price.
In the early hours, the much-discussed stock that trades under the name ‘HOOD’ took an ominous nosedive. At its lowest point, the price stood at just over $33, only to climb back up to over $37 in a short period of time. In hindsight, that recovery was short-lived, after which the share gradually fell back to below $35.
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Robinhood was founded in 2013 in Silicon Valley by college friends Vlad Tenev and Baiju Bhatt, who said they wanted to ‘democratize’ stock investing, i.e. make it accessible to a wider and, in practice, younger audience. The app has eighteen million customers and is currently not available in the Netherlands. This is due to the earning model in which no commission is asked from investors, but behind the scenes buy orders are passed on to third parties and earnings are earned from the difference between the bid and ask price of a transaction. This so-called payment for order flow is prohibited in countries such as the Netherlands and the United Kingdom.
Robinhood gained worldwide fame for the GameStop investor battle, when hundreds of thousands of forum members of the American discussion site Reddit harassed speculative fund managers. The massive buybacks of GameStop shares caused established hedge funds to lose many millions. Users Robinhood played an important role in this.
Also read: As soon as investing becomes a game, risks quickly disappear from sight
The app is not uncontroversial within the financial world because of the use of game elements. Robinhood, for example, was criticized for showing falling confetti on the phone screens of users who had just made a purchase, and for “scratching open” the first share they received for free. After mounting criticism, both tricks were scrapped. They would ensure that users see investing as a game, while there are risks associated with it, such as losing your investment.