Robinhood has ended its initial public offering with a $2 billion haul, a boost in stock price thanks to retail options traders and barely any exposure in the ETF realm.
The commission-free brokerage of choice for self-directed investors and meme stock connoisseurs initially sputtered on its debut on July 29, languishing below its initial price of $38 per share for several days, and seemingly proving its bears right.
But last Monday, Robinhood’s stocks became available for options trading on its own app. Cue the rocket ship emojis: The stock jumped 87% over two days to a high of $70.47 per share before settling down into the $50-60 range since.
Now that the company’s public debut is closed, which ETFs took a stake during Robinhood’s IPO? So far, it’s mainly thematic funds.
Ark Funds, ‘IPO’ Buys In
As of close of trading on Friday, the ETF issuer with the largest stake in Robinhood is Ark Invest, led by tech evangelist Cathie Wood. As of Monday morning, the issuer holds just more than 6.5 million shares among three funds, giving it a 0.007% sliver of a stake in the brokerage.
The largest concentration of almost 4.9 million stocks is in its flagship ARK Innovation ETF (ARKK), or about 1.17% of the fund. The rest of the HOOD stock is in the Ark Next Generation Internet ETF (ARKW) and the Ark Fintech Innovation ETF (ARKF), which hold 954,938 and 680,107 shares, respectively.
That should come as no surprise to industry watchers, as Cathie Wood has built a reputation on high-conviction bets in “disruptive innovation” companies across her firm’s funds. That includes finance, which was certainly disrupted by the meme-powered rise of GameStop and AMC stock fueled by Robinhood users.
The other ETF that bought into Robinhood is the Renaissance IPO ETF (IPO), which buys into prominent initial public offerings. Robinhood stock makes up 0.56% of IPO’s holdings, with just under 53,000 shares.
The other point of contention within the IPO was Robinhood setting aside about one-third of its stock for direct sale to its users, saying that strategy fits with the company’s ethos on widening access to financial instruments. A company going public usually reserves a far smaller amount of new stock to consumers and makes the rest available to investment banks and other distributors.
Institutional investors were fairly mum on Robinhood’s debut, particularly because the company is under investigation by regulators over its handling of a margin liquidity crisis brought on by the GameStop short squeeze.
Chart courtesy of Vanda Research
But early last week, options began trading for the stock, and retail investors took it for a ride.
Vanda Research, a firm analyzing retail trading volumes, estimated that Robinhood generated individual-account volumes of $467 million last Wednesday. That made it the fourth-most-traded equity security that day among retail traders, trailing only behind the SPDR S&P 500 ETF Trust (SPY), AMD and Moderna.
Who Else Will Pick It Up?
At the moment, Robinhood is months away from consideration for joining one of the broad stock indices that form the underlying of some of the most popular passive ETF vehicles.
While its current market cap would put it higher on the S&P 500 than legacy companies like Kraft Heinz and T. Rowe Price, Robinhood would need to wait a full year from its IPO date and produce an additional four quarters of profit before it would be eligible for inclusion on that index.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
It could find itself on the Russell 3000E Index, essentially the biggest 4,000 stocks by market cap, or a similar broad equity index based on its current cap size. However, the Russell indices set their rank days in May and complete their reconstitution in late June, putting it months away from consideration.
The company is disqualified entirely from the Nasdaq-100 index, the underlying index for the Invesco QQQ Trust (QQQ). Even though its image is that of a tech company, it’s classified as a financial services firm, and thus ineligible for the index.
For the time being, ETF investors looking for exposure to Robinhood and its $48 billion in market capitalization appear limited to a small number of ETFs, none of which tracks the broader market.