‘I think it’s a real thing’

Robinhood CEO and co-founder Vlad Tenev on Thursday defended private clients who invest in so-called meme stocks, saying the phenomenon is giving competitive companies access to capital they would otherwise not have.

“I think it’s a real thing. There are customers who love these companies, they want them to thrive,” Tenev told CNBC’s Andrew Ross Sorkin on Thursday ahead of the stock trading app’s Nasdaq debut. “You see [meme stocks] also get resources that allow them to hire really good management teams in some cases and then build them for the future. “

Robinhood helped attract unprecedented new, younger traders to the stock market during the pandemic. This surge has continued into 2021 and is marked by frenzied trading in meme stocks.

The stock trading app preferred by millennials found itself in the middle of a firestorm amid GameStop’s short squeeze, partly fueled by Reddit-fueled retail investors.

“I think the interesting thing about what we’ve seen in retail investing over the past year is that a lot of these companies have been hit hard by the pandemic,” Tenev told some of the retailers, some movie chains, and bricks and mortar. You have the institutions that basically write off these companies, and then there are small investors who maintain and support them. “

At the height of Meme’s stock surge, Robinhood restricted trading in certain securities due to the increased capital requirements of clearing houses. Robinhood raised more than $ 3.4 billion in just a few days to prop up its balance sheet.

“I don’t know if people understood the implications of what having high retail participation in the markets means, but I think basically it’s a very good thing,” added Tenev.

Problems selling stocks

Robinhood, slated to trade under the ticker HOOD on Thursday, sold shares on its IPO for $ 38 apiece – the lower end of the range of $ 38 and $ 42 – and valued the company at about 32 billion U.S. dollar. The online brokerage sold 52.4 million shares and raised nearly $ 2 billion.

Robinood and his syndicate banks didn’t finish allocating their IPO shares until about 9 a.m. ET, an unusual circumstance for a syndicate at the time. Goldman Sachs and JPMorgan Chase are the lead investment banks in the transaction.

An institutional source said, “They are asking us to buy Robinhood shares,” CNBC’s David Faber said on “Squawk on the Street” before the opening bell on Thursday. “And I said, ‘What else do you have?’ and he said ‘a lot,’ ”added Faber.

Robinhood – which had planned to distribute 20 to 35% of its IPO shares to its retail clients – reportedly sent messages to these retail investors late Wednesday about buying stocks, according to CNBC’s Leslie Picker.

“Mad Money” host Jim Cramer said Robinhood’s IPO was a “must-work deal”.

“I think the mood in retail is at stake because these are people who are really looking to make a lot of money and they don’t really understand the process because the process is pretty mysterious,” said Cramer.

Robinhood is a five-time CNBC Disruptor 50 company and topped this year’s list. Sign up for our weekly, original newsletter that has a closer look at CNBC Disruptor 50 companies like Robinhood before they go public.

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