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Robinhood gave its customers access to IPOs that all flopped

Nov. 8, 2022 Updated Tue., Nov. 8, 2022 at 10:07 a.m.

Vlad Tenev, chief executive officer and co-founder of Robinhood Markets Inc., talks during an interview at the company's headquarters in Menlo Park, Calif., on July 21.  (David Paul Morris/Bloomberg)
Vlad Tenev, chief executive officer and co-founder of Robinhood Markets Inc., talks during an interview at the company's headquarters in Menlo Park, Calif., on July 21. (David Paul Morris/Bloomberg)
By Annie Massa and Mathieu Benhamou Bloomberg

Robinhood Markets Inc. Chief Executive Vlad Tenev was fielding questions on the company’s latest earnings call when one person asked about a dormant project.

When, the caller wanted to know, would Robinhood resume letting customers invest in initial public offerings?

A Bloomberg analysis of the program, IPO Access, suggests it has been a flop for investors so far.

The initiative, which allowed users to buy shares of buzzy companies like Sweetgreen Inc. and Allbirds Inc. before they debuted on stock exchanges, resulted in losses for customers who still hold the shares. In an already dismal market for IPOs, those offered by Robinhood have performed even worse.

All 23 IPOs that Robinhood opened up to its customers have declined by double-digit percentages since the stocks debuted. Five – Iris Energy Ltd., Sono Group, Vaxxinity, Stronghold Digital Mining and Argo Blockchain – lost at least 89% of their value.

Still, Robinhood is undeterred.

“As soon as the IPO market turns around and we see more IPOs that meet those criteria, we’re going to be hard at work to bring those to our customers,” Tenev, 35, said on the call.

Robinhood’s own IPO in July 2021 was among those offered to its clients, and it hasn’t gone well. More than 300,000 users bought the shares for $38, and those who held on to their positions have watched the stock lose more than two-thirds of its value since.

A representative for Menlo Park, California-based Robinhood declined to comment.

While Robinhood signed up millions of new customers during the pandemic lockdowns, many of them novice traders, the firm has struggled to maintain its momentum amid rising interest rates and declines in stocks and cryptocurrencies.

Engagement is slumping.

The app had 12.2 million monthly active users in September, down by more than a third from a year earlier. Robinhood introduced multiple new features, including a web3 wallet and extended trading hours. The app still earns most of its revenue from trades, and as engagement falters, it faces the challenge of drumming up more activity on the platform.

Robinhood announced two rounds of job cuts this year, dismissing more than 1,000 employees, and plans to shutter seven offices.

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