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Redditors are pledging to avoid Robinhood's IPO, even as the company goes out of its way to lure day-trader interest

Natasha Dailey   

Redditors are pledging to avoid Robinhood's IPO, even as the company goes out of its way to lure day-trader interest
  • Reddit investors are shunning the idea of investing in Robinhood's upcoming IPO.
  • Robinhood filed for an IPO Thursday and pledged to reserve up to 35% of shares for retail traders.
  • "Just forget Robinhood altogether. Let them go down in lawsuits and loss of customer base."

    Robinhood wants the retail crowd to buy into its initial public offering, but some investors on Reddit are pledging to avoid the IPO.

    The trading app, which launched in 2013 with the mission to "democratize finance for all," publicly filed for an IPO Thursday. The company said it planned to make 20%-35% of its shares available to retail investors through the IPO Access function in its app. Luring retail investors could cause price volatility and short selling, Robinhood said, potentially setting it up for a meme-stock play.

    Despite the company making shares available to the retail crowd, some Redditors shunned the idea of investing in the stock, and others warned against shorting it.

    "Why would anyone frequenting this sub even be thinking about the IPO, let alone wanting to throw away money shorting it," said one Reddit post with more than 4,000 votes on r/Superstonk. "Just forget Robinhood altogether. Let them go down in lawsuits and loss of customer base."

    In its filing, Robinhood warned of more than 50 lawsuits it's facing from when the app halted buying of GameStop shares amid the epic rally in January. Another Redditor, citing the filing, noted the company said it cannot assure similar events won't happen in the future.

    "If this last statement is not a sign to get out of Robbing the Hood, I don't know what would," read the post, which received 36,000 votes on r/Superstonk. In response, another person with 8,000 comment karma said, "Who would buy their IPO with so many lawsuits looming?"

    "We apes buy stock we like. And we do not like that stock," said another. The Redditors did not immediately respond to Insider's request for comment.

    In the r/amcstock investing thread, several warned against shorting the stock, saying, "it's a trap."

    "When Citadel sees you shorting them, they will buy and hold and bleed us dry," read one post with 3,000 votes. "We will be giving them money to cover their shorts with. Don't play their game." The post has since been removed.

    Because Robinhood is a commission-free trading app, much of its revenue comes from payment for order flow, which is the compensation brokerages like Robinhood earn by having third-party firms execute customer orders. In its S-1 filing, the company said four market makers accounted for 59% of the revenue as of the end of March, with Citadel Securities alone making up 27%.

    "Best thing you can do is ignore them, and move your account," one Redditor said of the IPO.

    Robinhood did not immediately respond to Insider's request for comment for the story.

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