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Despite a controversial start to the new year, fintech startup Robinhood filed for its highly anticipated IPO and the commission-free brokerage allowed users the chance to buy shares before its debut. Robinhood is building a platform that hopes democratize the IPO process and allow its customers the chance to buy IPOs early, including its own.
A pioneer in the realm of commission-free and accessible investing, Robinhood provides margin lending services, access to options trading, cryptocurrency market access and more.
Though the company’s 2021 decision to halt trading on GameStop, AMC Theaters and other hot stocks triggered several lawsuits, the company proceeded with its IPO offering with assistance from Goldman Sachs. The broker used a direct listing with assistance from a special purpose acquisition company (SPAC).
Many details of Robinhood’s IPO remained up in the air, but preparing now can help any investors as Robinhood enters the market. Learn more about how to buy stocks and how you can buy into Robinhood with our quick guide for beginners. Even though the Robinhood IPO date has come and gone, there is still massive potential in this unique platform.
When is the Robinhood IPO Date?
Robinhood released its IPO on July 29, 2021. Sources close to the brokerage initially speculated that the company would hold its IPO in May of 2021 but that changed amid the company’s past investigation. Shares initially traded at $38 each.
Robinhood Financial History
The company, founded in April of 2013, acquired its first major round of funding in 2015 with a $66 million cash boost from New Enterprise Associates (NEA) and existing investors like Index Ventures, Ribbit Capital and Social Leverage. In April of 2017, Robinhood raised $110 million in venture capital funding and in 2018, the company closed on a round of Series D financing led by DST Global to the tune of $363 million.
In addition to a long history of successful fundraising efforts, Robinhood’s steadily growing valuation data should please potential investors.
Robinhood’s valuation has steadily grown since its $1.3 billion valuation in April of 2017. In 2020, the company received a valuation of $8.3 billion led by Sequoia Capital. The broker claimed 13 million users in 2020, but this number may climb higher due to an influx of new users emerging from the COVID-19 pandemic.
Robinhood Potential
Though Robinhood advertises itself as a free app, it generates income through a variety of channels. The most controversial of these channels: its practice of selling users order information to high-frequency traders. Robinhood faced an SEC investigation in September of 2020 over its early failure to disclose information sales practices. Robinhood has also been in the news as early as January 2021, after it felt the weight of steep collateral costs during the highly-publicized GameStop stock short squeeze.
Despite this current controversy, it seems like an ideal time for Robinhood to finally enter the public sphere. Robinhood has momentum thanks to the influx of millions of new users brought to the simple app by the onset of the COVID-19 pandemic. Ideally, the broker will retain these customers and parlay its enhanced user base toward a positive public offering.
How to Buy Robinhood Stock
If you already have a brokerage account and you know how to buy and sell stocks, investing in Robinhood will look the same to you. If you don’t already know how to invest in the stock market, our guide for beginners will help you get started today so you’ll know what to do.
Step-by-Step Guide:
- Pick a brokerage.
Before you can invest in IPOs or trade stocks, you’ll need a brokerage account. A brokerage account is an online trading account provided by a financial service company that allows you to participate in the market by placing buy and sell orders. If you already have a brokerage account, you likely won’t need to open a new account to participate in an IPO. If you don’t already have a brokerage account, consider starting your search with a few of our favorite brokers below.
- Decide how many shares you want.
You might find it challenging to determine how many shares of Robinhood’s stock you want to buy. Robinhood followed the lead of other early 2021 IPOs and chose a direct listing, meaning that shares sold at whatever price the market determined based on investor behavior.
You may decide how much you want to invest based on the Robinhood stock price, or you can set a budget for all your investments to make managing your money easier. It’s normal for IPO stocks to dip in value after the first day of trading, so you might only want to invest on the date of the offering if you want to hold onto an IPO stock for a longer period of time. Don’t worry if you can only afford to invest a few dollars — most brokers now allow you to invest in fractional shares based on the amount of money you have in your brokerage account. - Choose your order type.
When you fully open and fund your account, you can place an order to buy any share of stock supported on the brokerage platform. The price you’ll pay and the time when your order fills will vary depending on the order type you choose. The best brokers offer access to a multitude of order types. Take a look at a few of the most common order types you might have access to:
• Market order: A market order executes as soon as possible at the current market rate. Though market orders give you little control over the price you pay per share of stock you buy, they’re the most likely type of order to fill.
• Limit order: A limit order executes at or below a “limit price” you specify when you place the order. For example, if shares of Robinhood stock trade at $100 a share and you set a limit price of $98, your broker would only fill the order if the price per share fell to $98 or below. Limit orders allow you to control the price your order is filled but these orders may not be filled if limit conditions aren’t met.
• Stop order: A stop order executes as a market order once the stock you buy reaches a certain price. Stop orders work for you if you aren’t sure that a stock is going to break through a sell wall.
• Recurring order: Select brokers allow you to place recurring orders, which execute at future intervals specified by you. This works well if you want to automate your investments.
Your broker may offer all of these order types or a selection of them, depending on the company you work with. Many brokers also offer access to more advanced order types. - Execute your trade.
Your broker will fill the order according to the price instructions you chose when you placed the order. If your broker cannot fill your order (for example, because the stop price you indicated was never reached) the broker may leave the order open or cancel the order at the end of the trading day. If your broker can complete your order, you’ll see your shares in your brokerage account. Most brokers will also send an email, SMS or push notification informing you when your order is complete.
Best Online Stock Brokers
Take a look at the best brokers on our list.
Responding to Robinhood’s IPO
Robinhood’s IPO date was one of the most anticipated offerings of the year. Those who had their orders filled during the day of the IPO likely used a market order to secure those shares. If you only want to buy into Robinhood as a long-term investment, you may want to wait for the IPO to settle down to buy your shares. Even highly popular IPOs tend to decline in price on the day of their opening.
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About Sarah Horvath
Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.