Robinhood IPO: 3 ETFs The Stock Could Soon Show Up In

Active funds could snap up shares right away, while other ETFs have already bent the rules in the past to add new shares between rebalances.
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Robinhood (HOOD) announced that it would be pricing its hotly anticipated initial public offering at $38 per share, valuing the company at roughly $32 billion. That's at the bottom end of its expected range, something that could be viewed as a belief that the IPO won't do as well as originally thought or could be a set-up for a bigger pop when it goes public.

In either case, Robinhood will begin trading on the Nasdaq exchange on Thursday.

Initial public offerings don't typically show up in ETFs early on for a number of reasons. Most index ETFs don't rebalance or reconstitute themselves on more than a quarterly basis. Because of this, there's a lag to many IPO stocks showing up in ETFs, if they even qualify at all. Robinhood, however, could be an exception because of its high profile. Actively-managed funds could snap up shares right away, while ETFs have already cited "extraordinary circumstances" in the past in order to add new shares in between rebalances.

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Here are three ETFs that I think could be among the first to quickly add Robinhood shares to their portfolios.

First Trust U.S. Equity Opportunities ETF (FPX)

Back when Snap went public in 2017, FPX (known then as the First Trust U.S. IPO Index ETF) bent its rebalancing rules in order to include the stock mere days after it went public. It did so citing the importance and size of Snap's IPO and made the decision to not wait until the next rebalance to include. It was important enough to include as soon as possible.

If IPO size is a factor, it's worth noting that Snap's market cap and Robinhood's market cap at initial public offering will be nearly the same. If FPX's management team considered Snap "important", there's no reason why they wouldn't consider Robinhood the same.

There's no guarantee this will happen, of course, but the precedent has already been set and I wouldn't be at all surprised to see it happen again. The other IPO ETF, the Renaissance IPO ETF (IPO), has the same ability to rush a stock into its portfolio, so that one is a possibility as well.

Global X Millenial Consumer ETF (MILN)

If you have an ETF that is based on targeting companies that have a "high likelihood of benefiting from the rising spending power and unique preferences of the U.S. millennial generation", it's hard to imagine a stock other than Robinhood being a better fit. It's millennials that are powering Robinhood's popularity and I could easily see the stock making it's way into MILN's top 10.

With MILN having "consumer" in its name, it would be easy to assume that it's focused on stocks, such as Nike (NKE), Costco (COST) and Apple (AAPL). While those three are in the fund's top 10, so are straight online platforms, such as Amazon (AMZN), Snap (SNAP), Facebook (FB) and PayPal (PYPL). Robinhood would fit right in with this group.

ARK Fintech Innovation ETF (ARKF)

It's tough to leave an ARK ETF off of this list. Choosing the ARK Innovation ETF (ARKK) would be the easy choice since it's the largest fund of the group and it includes their top picks across all segments of the economy. I'm going to go with ARKF instead since Robinhood would be more of a natural fit within this group.

ARKF only holds between 35-55 names in its portfolio, so it may be the odds on favorite for the ETF to hold the largest initial position in Robinhood stock.

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