(Bloomberg) — Robinhood Markets Inc. is asking investors to bet against recent performance history with the terms selected for its initial public offering.
The trading app maker that helped fuel meme-stock mania will attempt to raise more than $2 billion in an IPO that should price next week. And the listing, which is set to become one of 2021’s largest, is arriving at a time when other large IPOs are trailing the gains enjoyed by most debuts this year.
Robinhood will be the year’s seventh U.S. listing to raise at least $2 billion. The other six companies that also exceeded that mark are trading 1.4% below their offering prices on average, according to data compiled by Bloomberg. Meanwhile, average returns for this year’s 267 smaller IPOs, excluding special purpose acquisition companies, is 12%.
The biggest IPOs are lagging despite outperformance by large-cap stocks over the same period. The Russell 2000 Index has gained 7% this year, nearly half of the 13% climb by the S&P 500.
A representative from Robinhood didn’t immediately provide a comment.
There’s no one deal pulling down this group. AppLovin Corp. is trading 25% below its April 15 IPO price. Playtika Holding Corp. and Didi Global Inc. are both down by about 15%. Shoals Technologies Group Inc., Coupang Inc. and Bumble Inc. are trading above their IPO prices, but are all well below their first-day peaks.
For the most part, the institutional investors who participated in these IPOs are the ones exposed to the brunt of this weakness. But Robinhood plans to sell up to $770 million of its IPO to the retail traders that comprise its user base, according to a regulatory filing.
After buying an unusually large amount of the IPO, Robinhood’s retail investors will then be exposed to unusually early releases of lockup agreements that would normally prevent insiders from selling out of the gates. Combined, these nontraditional provisions make retail investors more vulnerable than usual if Robinhood trades as poorly as the year’s other top debuts.
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