Retail Traders Show Power Again, But Against Robinhood

thebalancemoney.com:

Retail investors—the very people who helped propel Robinhood to prominence in online trading—may have also been the ones who took the shine off the company’s initial public offering.

Robinhood Markets shares traded for the first time last Thursday and closed below their opening price, seen as a disappointing outcome for a company that attracted a new generation of traders to the stock market. Up to 35% of Robinhood’s Class A common shares had been reserved for its customersto purchase through the IPO Access feature on its popular free trading app. What initially may have been seen as a great marketing ploy for the company whose stated mission is “to democratize finance for all” may have been a misstep, though. A Bloomberg analysis found that Robinhood’s opening-day performance was the worst on record among 51 companies with IPOs raising that much cash or more. 

The company had gone ahead with the offering despite negative sentiment. It was, after all, used to controversy. Run-ins with various regulators had resulted in massive fines. Earlier this year, traders who had used Robinhood to gang up on hedge funds by trading low-priced, volatile shares like GameStop felt betrayed when the company suddenly restricted their trades, causing many of them to lose money. At congressional hearings investigating the debacle, Robinhood Chief Executive Officer Vlad Tenev defended the trading restrictions as well as the way the company earns its money—taking fees from companies that execute trades rather than guaranteeing its customers the best price.  

“I think there is a segment of their users who are effectively punishing them for what they did to them earlier this year,” said Matthew Matigian, CEO at Blue World Asset Managers. “I