Robinhood went for a traditional IPO (Initial Public Offering) vs the DPO (Direct Public Offering) chosen by Coinbase in their 14 April public stock debut, but with a relaxation of traditional six-month lockup rules – employees will be allowed to sell 15% of their Robinhood holdings immediately, along with another 15% after three months.
My fictional account of behind closed doors conversation between the HOOD board and the investment banker underwriters goes like this:
HOOD: “we might go the DPO route and just pay you a flat fee and bypass all those lockup rules”.
Banker: “IPO has much better price performance. And we can raise capital that HOOD really needs since the WallStreetBets problems. Our fees will be a rounding error.”
HOOD: “OK but what about those lockup rules?”
Banker: “we can offer employees an early partial exit”
HOOD: “our early investors want that too”
Banker: “that would crash the price.
HOOD: “OK, agreed”.