Popular trading app Robinhood’s (NASDAQ: HOOD) shares dropped over 8.3% yesterday in its Nasdaq debut to $34.82.
Usually, the hottest tech IPO price is above expectations, but this wasn’t the case with Robinhood. Big money managers didn’t show any appetite for this stock. It was a big blow for the trading app company and for GenZ and Millenials who bought shares during the IPO.
The Silicon Valley fintech startup sold 52.4 million shares, raising close to $2 billion. Co-founders Vlad Tenev and Baiju Bhatt each sold about $50 million worth of stock.
The stock opened at $38 apiece, matching the price the company agreed to sell its shares a day earlier, at the low end of the IPO target range ($38 to $42). However, the stock soon sharply dropped as much as 12% to $33.35 at midday in New York.
After it opened for trading, 49 million shares worth $1.8 billion changed hands in the 30 minutes. By 1 pm in New York, Robinhood was among the most actively traded stocks in the US, surpassing the likes of Apple and Tesla by the number of shares traded.
The $38 opening trade gave Robinhood a valuation of roughly $32 billion, putting it in the orbit of other large brokers like ETrade, which had an $11 billion equity valuation when it was bought by Morgan Stanley last year. Robinhood is valued at 10.5x forward EBITDA.
Private investors had valued Robinhood at $11.7 billion last September.
Class.com continues its funding spree. The startup, founded in 2020 as a learning platform to expand Zoom capabilities, announced today that it raised an additional $105 million in Series B funding.
Class is built on the Zoom Meetings platform and simply adds into its teaching and learning tools. Features include taking attendance, hand out assignments, give a quiz or test, grade work, proctor exams, and talk one-on-one with a learner.
The reported round was led by SoftBank’s Vision Fund 2. Additional investors participating include: GSV Ventures, Emergence Capital, Maven Partners, Owl Ventures, Insight Partners, SWaN & Legend Venture Partners, Revolution’s Rise of the Rest Fund, Learn Capital, Reach Capital, Slow Ventures, Sound Ventures, Chimera Investment, Daher Capital, Guy Oseary, Bill Tai, and Super Bowl champion and entrepreneur Tom Brady.
The company founded by ex-Blackboard executive Michael Chasen has raised over $160 million in under a year.
“Class has a bold vision for changing the way the world learns, and we have experienced increased demand for Class not just in the United States, but around the world,” he said.
“Over the past year, students and instructors around the world have been using Zoom to power remote and hybrid classes,” said Audrey Witters, Managing Director, Online & Entrepreneurship Programs at Stanford Graduate School of Business, and Class strategic advisory board member. “Class offers features designed to make virtual classrooms around the world feel more like real classrooms.”
Class.com will become available this summer. Names of customers have not been provided. In this regard, the startup says, “since launching less than a year ago, Class is already deployed in the United States and in over 20 countries worldwide.”
Professional e-learning company OpenSesame.com announced last week a $50 million investment by equity firm JMI Equity with participation from existing investors, FTV Capital and Altos Ventures. To date, the total funding date is $107.4 million.
Portland, Oregon-based, 173-staffed company stated that the last investment will accelerate its innovation and global expansion. AI-powered course curation will be one of those areas, according to Don Spear, CEO of OpenSesame.
With a catalog of over 20,000 learning courses in 19 languages — including classes from TED and Harvard Business Publishing —, Open Sesame has noticed a surge in demand on topics such as diversity, equity, inclusion (DEI), and leadership development. OpenSesame’s Simon platform allows learning administrators to customize lessons.
Also this month, Open Sesame announced the integration of its courses with Microsoft Viva’s Employee Experience Platform (EXP), powered by Microsoft 365 and utilized primarily through Microsoft Teams.
U.S. education tech startups raised over $2.2 billion in 2020, a 30% increase from 2019.
The last version of Open edX called “Lilac” has been formally certified as an LTI Advantage platform by the IMS Global Learning Consortium.
Learning Tools Interoperability (LTI) is a standard to connect extensions to educational platforms.
The Consortium announced last month that “Open edX Platform Lilac has completed conformance testing for the IMS Standards.”
The edX organization became a contributing member of IMS in 2020, after years of disagreement. The Open edX platform has long supported LTI as an extension mechanism to enable a wide range of learning experiences.
The “Lilac” version uses the LTI consumer XBlock.
Ned Batchelder, Open edX Architect, stated that “as an open-source platform, we believe strongly in supporting standards like LTI that enable instructional teams to choose the best tools for their needs.”
The Open edX platform and code will remain under the ownership of MIT and Harvard through a new non-profit organization that will receive $800 million from 2U Inc.
[Disclosure: IBL Education, the parent company of the IBL News service, uses Open edX software on its platform, and provides custom ecosystems]
While striving for a valuation of up to $35 billion, Robinhood Markets Inc, the Menlo Park, California-based online brokerage has started the allocation of shares for its app traders.
At a range of $32 to $42 per share, the firm said that it is seeking to raise about $2.2 billion.
Since its inception, Robinhood raised $5.60 billion in 24 investing rounds with 56 investors involved. The company’s impressive growth is mostly due to the intuitive interface, zero commission, and cryptocurrency trading.
With 18 million active retail traders, predominantly Gen Z and Millennials, with an overall client asset amount of $80 billion, Robinhood is trying to reshape how small-time traders invest in companies becoming public.
As it advances toward its IPO and defying conventions, last Saturday, the startup hosted a live-stream roadshow presentation — with telepromptered answers. All of Robinhood’s app customers received an email invitation to attend. Typically, this type of event is limited to institutional investors and hedge funds.
The Silicon Valley startup that popularized commission-free trading is reserving 20% to 35% of its shares for traders of the app, an unusual move for a high-profile offering.
The company is expected to start trading on the Nasdaq Stock Market on July 29, under the ticker HOOD.
For users, the max share is at $50.40, which results after adding a 20% buffer on the highest price in the range. Users’ orders remain valid if the final price of the IPO is within this 20% range. If the price moves outside the 20% buffer or is above the max share price, the trader will need to reconfirm its request – all of it through the app.
CEO and Co-Founder, Vlad Tenev said during the live-streaming event, “We anticipate this will be one of the largest retail allocations ever.”
“At Robinhood, the rich don’t get a better deal” is one of the company’s mottos.
Regarding its controversial revenue-making practice of “payment for order flow”(PFOF)— under which Robinhood receives fees from market makers like Citadel Securities for routing orders to them —, CFO Jason Warnick, said, “If a ban or other limitations on it were to be imposed, we believe Robinhood and the industry would adapt and explore other revenue sources.”
Beyond the fees by routing its users’ orders — about 81% of its revenue; Robinhood receives an average of 2.5 cents for every $100 traded —, another source is Robinhood Gold membership, which gives clients access to investment tools and margin loans for $5 per month. There is also stock and cash interest.
The business model of PFOF is being scrutinized by the SEC amid concerns that it creates a conflict of interest because retail traders aren’t getting the best trading execution available.
Another announcement during the webcast is that Robinhood Markets Inc is considering launching U.S. retirement accounts, like IRAs and Roth IRAs, which would allow Robinhood to tap a gigantic market. Currently, there are $12.6 trillion in IRAs.
“We are interested in building more account types, including IRAs and Roth IRAs, we’ve been hearing that a lot from our customers. We want to make first-time investors into long-term investors,” Tenev said.
Robinhood was founded in 2013 by Vlad Tenev and Baiju Bhatt, at that time roommates at Stanford University. They will hold two-thirds of the voting power after the IPO, as the prospectus showed.
Some experts have warned about Robinhood’s revenue models, regulatory practices, and exaggerated valuation based on a price/sales ratio of 26.
Today, Robinhood is the third-largest brokerage firm based on the number of funded accounts, right behind Fidelity and Charles Schwab (which purchased TD Ameritrade in 2020).
However, its CEO is not licensed by FINRA as a registered investment advisor.
Confluent, Inc. (NASDAQ: CFLT), the latest open-source startup becoming public, was named this week Google Cloud Technology Partner of the Year for the third year in a row.
This company handles a platform focused on data in motion and is predicated on the open-source software Kafka. It was listed in the Nasdaq on June 24, showing that OSS startups (Open Source Startups) can perform successful IPOs — its market capitalization is 9.94 billion.
Many educational organizations use this solution for their learners’ analytics — IBL, the parent company of this news service, among them. Additionally, 2U’s purchase of edX non-profit, open-source platform has raised attention on OSS.
Market analysts expect more Venture Capital deals and IPOs to land this year. Prefect, BuildBuddy, Feast, and Airbyte have recently attracted funding from VC investors.
“The Confluent IPO and the recent wave of funding rounds for startups in the space seem to indicate that market appetite for such companies has reached a new, higher plateau,”has writtenAlex Willhem in Techcrunch.
Despite being a money-losing company, the public market dispensed a good reception. Wall Street recognized that Confluent had a $50 billion market to attack.
“Because open-source projects can have strong organic momentum, it can help public investors see future growth at the corporate level,” said Jay Kreps, CEO at Confluent.
In terms of OSS monetization models, Prefect Technologies Inc., a company specialized in dataflow automation that raised $32 million last month, said that selling a hosted service and features is the old-hat way. Instead, the company’s commercial product is a monitoring API.
Thoma Bravo-controlled Instructure Holdings Inc. (NYSE: INST) returned to the secondary market yesterday after the company that owns Canvas LMS priced its initial public offering of 12.5 million shares at $20 apiece — meaning the company estimates it will raise $250 million, mostly intended to cut its debt of $778 million in the long term.
Executives of the company rang the opening bell at the NYSE today, as shown in the pictures and video below.
The registration statement was filed at the SEC on July 21, 2021. The offering is expected to close on July 26, 2021.
The stock closed at $20.69, after a gain of 4.90% on its first day of trading. The market capitalization was 2.95 billion.
It was a successful debut for Thoma Bravo, the investment equity company that took Instructure private last year in a deal valued at $2 billion. The Salt Lake City, Utah – based start-up first went public four years ago.
The finance company will own 88% of the stock after the offering, or 87% if the overallotment option is exercised in full. Instructure granted the underwriters a 30-day option to purchase up to an additional 1.8 million shares at the IPO price.
During the first three months of 2021, Instructure had revenue of $94.0 million and a net loss of $33.1 million, according to the filing.
Responding to questions raised by university partners on the implications of the 2U’s purchase of edX, CEO Anant Agarwal reassured the contractual terms of the deal and said that “Harvard and MIT will continue offering courses and programs on the edX.org site.”
In a blog post that included FAQs, Mr. Agarwal insisted on the idea that Open edX software — that will power the 2U’s edX.org portal — will remain under the umbrella of MIT and Harvard, ensuring “is continually improved, remains open-source, and powers a vibrant open source community.”
Moreover, he added: “Following the closing, 2U expects to be a significant contributor of code to the Open edX platform, and the transaction is expected to increase the impact that Open edX can have in supporting learning outcomes around the world.”
In a series of tweets and retweets, the CEO of 2U (NASD: TWOU), Chip Paucek confirmed Anant Agarwal’s views: “Anant’s post is so important. This is everything. Our Shared Mission: A Strong Foundation for an Exciting Future.”
Two of Anant Agarwal’s retweeted posts stated:
• “Moving forward, @edXOnline, @2Uinc, and our combined partners will only expand upon our impact, and continue to enable innovation in higher ed as we enter the post-COVID world”
• “I am delighted to share these details about the commitments being made to further the @edXOnline mission. For me, these commitments are the foundation of our entire combination with @2UInc.”
Several universities that partner with edX or use their open-source software had discussions in the last weeks about the transaction, adopting a hold position until learning more about the significance of 2U buying edX.
“We have contractually committed for five years, and we see no reason why edX and 2U would not still continue these activities beyond five years, as the commitments are so in line with our shared long-term vision and mission,” wrote edX’s CEO.
Anant’s post is so important. This is everything. Our Shared Mission: A Strong Foundation for an Exciting Future #NoBackRowhttps://t.co/VTZ3fO9Fop
Moving forward, @edXOnline, @2Uinc and our combined partners will only expand upon our impact, and continue to enable innovation in higher ed as we enter the post-COVID world (4/5)
Boston-based corporate training Skillsoft Corp. (NYSE: SKIL) announced yesterday it successfully completed its debt refinancing. Now the company has $480 million of long-term debt outstanding.
A press release indicated: “The company closed a new $480 million senior secured term loan B facility. This facility, along with cash on hand, will be used to refinance and repay the company’s existing term loan facilities, thereby reducing long-term debt by approximately $130 million.”
“The new term loan B facility reduces Skillsoft’s interest rate by 300 basis points and extends its maturity from 2025 to 2028. Together, the refinancing and debt paydown will decrease the company’s annual interest payments by approximately $25 million.”
Jeffrey R. Tarr, Skillsoft’s Chief Executive Officer, explained, “We are pleased to complete our refinancing, which strengthens our balance sheet, increases our free cash flow, and provides substantial financial flexibility to execute on our organic and acquisitive growth plans.”
Last month, Skillsoft acquired professional development and executive individualized coaching SaaS platform Pluma for $22 million in cash. Pluma’s coaching experience, via in-app messaging and video sessions, will be integrated into Skillsoft’s AI-driven Percipio platform.
Also, in June, Skillsoft started to trade in Nasdaq. On June 14, the stock opened at $10.90 per share. Yesterday, it closed at $9.10. The stock loss, about 15%, reflects that investors haven’t rewarded Skillsoft’s refinancing efforts and growth strategy to date.
Skillsoft claims it serves training to 70% of the Fortune 1000.
Language-learning app Duolingo Inc (NASDAQ: DUOL) set the price range of $85 to $95 for its IPO (Initial Public Offering).
The Pittsburgh, Pennsylvania-based startup is offering 5.1 million shares of Class A common stock (1.4 million from the selling stockholders, with these proceeds not going to the company), according to an amendment to its S-1 filing released today.
This offering of stock would rake $433.5 million to $484.5 million.
