Robinhood’s stock debut disappointed yesterday.
The “stonk”-slinger priced its shares at the low end of its range, unusual for a buzzy startup in a hot IPO market: $38 versus a top-end guidance of $42. After fleetingly brushing $40 per share, the stock slumped to $34. The price has rebounded a bit, above $36 per share, as I write this, but still putting the earliest buyers under water.
How did Robinhood’s stock go from sizzle to fizzle? The company soared during the pandemic, helped by bored day-traders bidding up meme-ified equities, but retail investor enthusiasm has cooled from the heights it reached earlier this year. Add to that the company’s unorthodox approach to the IPO, as my colleague Shawn Tully writes, where it allocated lots to retail investors, its primary user base, over less trigger-happy institutional players.
Looming government action presented another headwind. During the GameStop stampede at the end of January, a spotlight was cast on Robinhood’s cozy relationship with hedge funds. People have by now wizened up about Robinhood’s underlying business-model: “payment for order flow,” a controversial tactic now coming into the cross-hairs of regulators.
While Robinhood missed its bullseye, I had my eye on another IPO. A day earlier, on Wednesday, Duolingo, the language learning app, debuted on the Nasdaq stock exchange. The company’s stock instantly leapt above its $102 IPO price, opening at $141 per share. (It’s now trading around $139 per share.)
Duolingo and Robinhood share DNA in common. Aside from the green logos, the two are masters of gamification—nudging users to “play,” regularly, by dishing out virtual rewards and using other tricks. (I should know; I’m on a 922-day Mandarin-learning streak, thanks to that little owl mascot’s encouragement.)
Duolingo’s trade, language learning, isn’t as prized by shareholders as Robinhood’s investing specialty. Duolingo is worth just a fraction of Robinhood’s market cap—$5 billion versus $HOOD’s $30 billion. But it’s aim is noble—bridging cultural divides.
Robinhood is, meanwhile, still figuring out how to cross the chasm between Main Street and Wall Street.
Robert Hackett
@rhhackett
robert.hackett@fortune.com
NEWSWORTHY
Amazon slides. Shares of the retail giant plunged more than 7% July 30. The drop comes on the heels of Amazon's latest earnings, which failed to live up to analysts' expectations and delivered the market an unexpectedly weak forecast for the coming months. The company reported alongside its earnings that it had been fined nearly $900 million over violating privacy rules in the European Union. Amazon Founder, and maybe former astronaut, Jeff Bezos has seen his net worth fall by $13.5 billion, as a result.
Trevor Milton indicted. Federal prosecutors indicted Nikola Founder Trevor Milton on Thursday. Pleading not guilty, Milton has been charged by federal prosecutors for allegedly lying to investors about "nearly ever aspect" of the electric truck manufacturer's prospects, Manhattan U.S. Attorney Audrey Strauss said. Among the specifics of Milton's alleged wrongdoings? Directing a Nikola employee to film the company's truck rolling down the hill as if it was being driven, a claim that featured prominently in short seller Hindenburg Research's report on the company almost a year ago.
China's tech crackdown. Investors continue to flee from Chinese tech stocks, which have been decimated in recent weeks as officials in Beijing continue to keep a close eye on the sector. Alibaba, Kuaishou Technology, Meituan and Tecent collectively lost $344 billion of market capitalization in July alone.
Binance says bye to Europe, for now. Cryptocurrency exchange giant Binance is unwinding its European futures and derivatives business, as regulatory pressure over digital currencies continues to mount. The move marks the latest retreat for Binance, which recently stopped selling "stock tokens," or crypto assets linked to the share prices of major stocks.
This edition of Data Sheet comes courtesy of Declan Harty.
FOOD FOR THOUGHT
'Manufacturing Hell.' In an adaptation from the upcoming "Power Play: Tesla, Elon Musk, and the Bet of the Century," Tim Higgins, a reporter at The Wall Street Journal and author of the book, details the 2018 crisis that put electric car maker Tesla on the brink. Musk, on the heels of his widely publicized settlement with the U.S. Securities and Exchange Commission, was facing the mountainous task of delivering 100,000 vehicles in the third quarter of 2018, 60% of which were planned to be delivered in the final weeks of September, Higgins writes. So, Musk doubled down on the sales pressure, even going so far as to threaten one member of the Tesla team with the possibility of being fired if he didn't manage to more than double the number of people scheduled to pick up their Model 3s.
From the article:
Overnight, Mr. Hunter and other managers pieced together a solution, employing software that allowed his team to text from their computers. They stopped the practice of walking customers through the reams of sales paperwork that would eventually need to be completed and signed. If Mr. Musk’s goal was to have people in a queue to pick up their cars, then that’s what they would do. They’d just start assigning pickup times for customers: Can you come in at 4 p.m. on Friday to get your new Model 3?
Often, Mr. Hunter didn’t even wait for any response before putting a customer on the list for pickup. If the customer couldn’t make it, she might be told she would lose her spot in line for a car that quarter. Customers became more motivated to complete the tedious paperwork needed to complete a sale when there was a Model 3 dangled in front of them. Mr. Hunter’s team began telling customers to have it all completed 48 hours before delivery.
The team raced through their list of customers, assigning times at pickup centers around the U.S. By 6 p.m. the next day, they had reached 5,000 appointments. Mr. Hunter gathered the team to thank them for their work. He fought back tears. He hadn’t told them that his job was on the line; all they knew was that it was super-important to schedule a bunch of deliveries. That night on the call, Mr. Hunter reported the results to Mr. Musk.
“Wow,” Mr. Musk said.
IN CASE YOU MISSED IT
Uber CEO Dara Khosrowshahi on why the ride-hailing giant is betting on flying taxies by Jeremy Kahn and Katherine Dunn
SEC imposes new disclosure rules on Chinese companies seeking IPO by Jessica Mathews
Why Volkswagen thinks buying a car rental company will turn it into Uber—but better by Christiaan Hetzner
Scarlett Johansson's 'Black Widow' lawsuit could transform the streaming era by Emma Hinchliffe and Claire Zillman
The dates to watch following Robinhood's IPO by Lucinda Shen
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BEFORE YOU GO
So who gets to be CEO? The Los Angeles Times has a review out Friday on Higgins' book, which includes details of a 2016 conversation between Musk and Apple's Tim Cook about a potential merger. But, in what turned out to be a testy exchange, Musk purportedly demanded to be made Apple CEO on a call with Cook himself. The Apple executive promptly responded in turn with an expletive-laden response before hanging up the phone. Both executives have naturally since come out to say they have never spoken to each other.
