IPO Direct Listing day was memorable because not only did it top tick the price of bitcoin in 2021, but it also marked the peak price the crypto exchange in its brief public life.
The reason behind the subsequent collapse: relentless, aggressive selling by insiders which because the public offering was a direct listing and not a traditional IPO was allowed.
It now appears that Robinhood's stock price - once it breaks for trading - will follow the same fate. We know this because in addition to the other remarkable disclosures in the company's S1 filing profiled previously - like Robinhood paying former SEC head Daniel Gallagher $30 million for working as Robinhood's chief legal officer...
... the insiders behind the Robinhood listing will have some early chances to trim their positions. That’s good news for them, but the unusual strategy is similar to the one that helped push Coupang Inc. below its initial public offering price for the first time.
According to Bloomberg, HOOD employees and directors will be able to sell a portion of their holdings as soon as the first day of trading, according to the IPO prospectus that was unveiled on Thursday. That, as Bloomberg's Drew Singer notes, is quite a departure from the six-month lockup periods that accompany most listings.
While it’s not unheard of to set lockup expirations earlier than for the typical IPO, Robinhood’s plan looks particularly liberal. Unlike Coupang, Robinhood’s lockup expirations begin to trigger with the first day of trading.
Besides the first day, opportunities for insiders to sell shares include the stock’s 91st day of trading as well as a lockup expiration linked to its first earnings report. The approach resembles Coupang’s, which fell below its IPO price less than two months after going public with a plan to let some insiders start selling within a week of the debut.
Whose brilliant idea was it to structure the IPO in such a way as to do away with lockups entirely? Why Goldman of course. Coupang’s IPO was led by Goldman Sachs, the same bank at the top of Robinhood’s syndicate.
Not that Goldman will be impacted: the bank will collect its customary 4-5% fee, Robinhood's insiders will immediately liquify a substantial portion of their newfound fortunes, and the only losers will be those investors who naively think that the offering is meant to make them rich.