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Robinhood-Winked? What to Watch Into Happy Hour

Let's take a look at Robinhood's performance in its public debut, the potential catalysts and the probes it faces.

Were investors HOOD-winked with the debut of Robinhood on the public markets? (All credit goes to Real Money's Helene Meisler for the wordplay.)

Perhaps not, as companies such as Uber, didn't have stellar IPO days either. 

But, as I wrote about on Real Money there are other concerns around the company.

So, let's take a close look at Robinhood's trading debut and the scrutiny the company faces. 

But First...

I'm bringing this back up from yesterday. 

The company said it received inquiries from the Financial Industry Regulatory Authority and the Securities & Exchange Commission.

The company is facing a probe related to employee trading in so-called momentum stocks before it enacted a trading restriction in January.

"These matters include inquiries related to whether any employee trading in these securities may have occurred in advance of the public announcement of the Early 2021 Trading Restrictions on January 28, 2021, " the company stated in its filing.

Now Onto the Trading 

Robinhood opened at $38, but ended at $34.82. 

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The stock did hit a rough patch out of the gate, managing to hit a high of $40 a share before dropping below the opening price and holding on to the $34 mark for the afternoon. 

So, why did Robinhood go public when they were still facing probes and had just dealt a negative news cycle during the spring following the trade restrictions on certain stocks which were placed in January?

“I think this is the last resort” for Robinhood to come public," Hugh Tallents, senior partner at consulting firm cg42 said. He pointed to pros right now, such as the new user account, retail investing money flowing into both the public market and through Robinhood, and a bullish IPO market. “I think they have some tailwind, but I also think that the headwinds will only get stronger as the year goes on.”

However, Julie Chariell, Bloomberg IIntelligence's senior fintech analyst, pointed out--ahead of the IPO--that "you have...as much as 35% of the shares may be allocated to retail and so what does that mean for pricing in the aftermarket capabilities, evaluation, volatility and so on.

But, whatever the reason may be, Robinhood is now officially a public company. 

Let's Dig Into the Speculation, Shall We?

Is this going to be a tale of Robinhood and the merry men or Hoodwinked? That's the question that everyone is trying to answer.

For Real Money, I dug into the potential catalysts for Robinhood. Could crypto take off? What happens if there's more regulation? How about payment for order flow? Is that a practice that will be cracked down on?

And when looking at both regulation, and the probes Robinhood faces, one thing was made clear by Georgetown Associate Professor James Angel, who not only specializes in market regulation on a global scale but was also interested in buying  (HOOD) - Get Robinhood Report following its debt.

 Angel said, "The thing about our securities laws is they are so precise. And so vague at the same time."

If you're interested in taking a deep dive on Robinhood, you can read my full column here.