Popular trading app Robinhood is expected to be "closely watched" during and following its Wall Street debut on Thursday, after an initial public offering at the "low end of the expected range" valued the company at $32 billion, CNN and CNBC report.
Much of the curiosity centers around an "unusual feature" of the company's IPO, namely that it "set aside up to 35% of shares for individual investors on its platform," which is a "huge chunk of stock that could fuel initial volatility," per CNN.
Usually, "up to 85 percent" of a company's IPO shares go toward hedge funds and money managers. But by offering a "sizable portion" of shares to customers at the IPO price, Robinhood is reportedly trying to (1) make its IPO more accessible "to retail investors and not just the financial elite," and (2) make good on its mission of "democratizing financial markets," writes CNN.
That said, the scale of such a "retail allocation" is reportedly creating "lots of uncertainty." "As I recall, there has not been a company doing what Robinhood is planning to do at the magnitude they're planning to do it," said R.A. Farrokhnia, a professor at Columbia Business School, adding that the company would find itself in "uncharted regulatory territory" should the process not go according to plan, reports CNN. IPO shares haven't been allocated to retail investors in "a big way," and many might opt to sell if the stock makes big moves early, creating turbulence.
If things do go well, Robinhood might build up goodwill with customers and positive publicity. But technical or other problems could cause issue for a company that has already "drawn regulatory and political scrutiny for a variety of business practices," reports CNN and Axios.
"Robinhood already has been in the hot seat," said Farrokhnia to CNN. "Can they afford this?" Read more at CNN.