Investors sell off riskier stocks

In 2021, investors began to sell off riskier financial assets due to fears of interest rate hikes, supply chain constraints and a multitude of other uncertainties that carried into the start of 2022. Companies with negative to minimal earnings have suffered the greatest losses, while the Dow Jones, S&P 500 and NASDAQ have declined from highs by 5.99%, 8.30% and 14.93% respectively. 

Unfortunately for investors, companies that recently listed their shares of stock for the public to purchase have not escaped the shifting market. These initial public offerings (IPOs) had a record year in 2021, with 1,035 IPOs across all sectors — 23 of them occurring on the popular trading platform Robinhood. Robinhood claims to “democratize finance for all”, but the IPOs on its platform have had disproportionately greater losses when compared to the broader market. 

After examination, stocks with IPO access on Robinhood have had a median loss of 22.80% from their IPO price and a median loss of 54.15% from their previous highs. In comparison, losses among all 2021 IPOs sit between 9% and 14%, meaning IPO access through Robinhood has experienced roughly double the losses of comparable IPOs as well as quadruple the decline compared to the NASDAQ highs.