Robinhood’s Customers Finally Found a Valuation Too High—for Robinhood
Online brokerage Robinhood priced its initial public offering at $38 each, at the low end of its $38 to $42 price range. While that most likely reflects softer demand, there is some suggestion the company favors leaning lower to **boost the chances** of a first-day bounce.

As the company has set aside up to 35% of the IPO for its own customers, the price may reflect retail investors’ own doubts. One reason behind that **could be the valuation**—$32 billion for a free stock trading app seems high, even if Robinhood’s growth has been nothing short of remarkable. That valuation looks demanding in light of regulatory risks. The Securities and Exchange Commission is reviewing what’s called payment for order flow, a practice which accounted for roughly 80% of Robinhood’s revenue in the first quarter. On the other hand a positive outcome of the review could change the picture.

The timing of its debut is another factor. At the height of the **GameStop** and meme-stock frenzy things may have been different. Robinhood’s growth is slowing—the company itself expects third-quarter revenue to decline. To make matters worse, retail investors aren’t exactly enamored with Robinhood, whose moves to **temporarily limit trading** in GameStop and **AMC** in January have not been forgotten.

Throwing the IPO open to its own customers could increase the volatility of its stock, Robinhood concedes. Whatever happens, it’s **unlikely to be dull**.

—*Callum Keown*
https://www.reddit.com/r/StockMarket/comments/otvy6f/robinhoods_customers_finally_found_a_valuation/