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Trading app Robinhood sets share price at low end of range in IPO

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Robinhood has priced its shares at $38 apiece, the low end of its target range, reflecting slack investor demand for the highly anticipated initial public offering of the popular trading app.

The company, which aimed to sell 55m shares, had set a range between $38-$42 a share. While the hottest tech IPOs often price above of expectations, Robinhood’s value indicates that investor appetite was not insatiable for the brokerage’s stock.

The $38 final offering price announced late on Wednesday gives Robinhood a valuation of $31.7bn. Private investors previously valued it at more than $11bn in August. Shares are expected to begin trading on Thursday on the Nasdaq stock market.

California-based Robinhood became a venue of choice for many first-time stock investors, offering commission-free trades that it encouraged with rewards, bonuses and push notifications. With a median age of 31, its customers are often younger and have smaller account balances than those of established online brokerages such as Schwab, Fidelity and ETrade.

It has recorded explosive growth, doubling the number of accounts on its platform since the start of the year to 31m.

However, Robinhood has also come under fire from regulators for the game-like features on its app, limited customer service, and dependence on a controversial practice of selling trades called payment for order flow. In June the Financial Industry Regulatory Authority fined Robinhood $70m for causing “widespread and significant harm” to customers. It was the biggest penalty ever issued by Finra.

The offering allocated up to 35 per cent of shares to its own customers. Modest appetite for Robinhood’s IPO suggests investors were not immune to the recent high-profile scrutiny as well as concerns about how the brokerage would sustain its high trading volumes in a post-pandemic world where people had time for other pursuits.

Robinhood’s offering paves the way for a windfall for its executives and investors. At the IPO price, Robinhood co-founders Baiju Bhatt and Vlad Tenev would own shares worth $3bn and $2bn, respectively.

Index Ventures, the company’s largest outside investor, would have a stake worth $3.2bn.

Robinhood’s extraordinary growth has periodically led to technical outages during periods of elevated volume, and during a meteoric rise in shares of the meme stock GameStop in January the platform had to suspend trading and raise billions in order to meet capital requirements to market makers.

Investors that provided the $3.5bn in emergency funding stand to receive shares at a 30 per cent discount to the offering price, as their debt converts into equity.

Bhatt and Tenev will retain majority voting control over Robinhood through a dual-class share structure, meaning they will have a minimum of 65 per cent of the voting rights despite holding less than 20 per cent of the company’s shares.

This high level of voting control was cited by institutional investors as a concern in participating in the offering, despite Robinhood’s strong recent performance.



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Abu Dhabi’s Adnoc plans 7.5% stake float of oil drilling unit

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Abu Dhabi National Oil Co updates

The Abu Dhabi National Oil Company plans to list a 7.5 per cent stake in its drilling unit via an initial public offering on the Gulf emirate’s stock exchange next month.

Adnoc Drilling is 95 per cent owned by Adnoc, which has in recent years embarked on a modernisation drive including diversifying its investor base and unlocking cash from its infrastructure base.

In 2018, when Baker Hughes acquired a 5 per cent stake in the business, Adnoc Drilling had an equity value of $10bn.

“Adnoc Drilling’s planned value creation opportunities, including a major rig fleet expansion and well drilling program, ideally position the company to take full advantage of emerging opportunities,” said Sultan Al Jaber, Adnoc’s chief executive.

The offering, which is open to domestic and international investors, is expected to take place in October on the Abu Dhabi Securities Exchange (ADX) subject to market conditions and regulatory approvals. The size of the offering could be increased.

The United Arab Emirates, which is already the third-largest producer in Opec, is committed to raising its output capacity from 4m barrels a day to 5m barrels a day.

The Gulf state earlier this year clashed with its larger neighbour, Opec kingpin Saudi Arabia, by refusing to endorse a planned Opec+ production increase. Abu Dhabi argued that its “baseline”, the level from which Opec quotas are calculated, should be increased. A compromise deal was clinched in July that raised the UAE’s baseline quota from 3.2m barrels a day to 3.5m barrels a day.

Adnoc Drilling, the largest drilling company in the Middle East by fleet size, is the sole provider of drilling services to Adnoc. In 2020, Adnoc Drilling’s revenues were $2.1bn, with a profit of $569m.

The deal would be the second IPO launched by Adnoc since the 2017 listing of its distribution arm, the largest operator of petrol stations and convenience stores in the UAE.

The national oil company has separately opened its refineries and oil and gas pipelines businesses to international investors. It is also seeking to sell stakes in its power plants and other infrastructure.

Adnoc earlier this year started trading futures of its flagship crude oil, Murban, on ICE Futures Abu Dhabi, a commodities exchange based in the capital’s financial district.

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Chemicals distributor Azelis seeks to raise €880m in Brussels IPO

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Speciality chemicals distributor Azelis is seeking to raise €880m in an initial public offering in Brussels in what will be one of the sector’s largest listings this year.

The Antwerp-based company, which is owned by Swedish buyout firm EQT, is targeting a valuation of more than €5bn, according to people familiar with the matter.

The IPO would make Azelis the world’s fourth-largest listed chemicals distributor in a highly fragmented €117bn market. As well as using the IPO’s proceeds to cut some of its €1.6bn of debt, the company also plans to make further acquisitions.

“As a public company, we believe we will be able to fully capitalise on growth opportunities, continuing to complement our strong organic growth with accretive acquisitions,” said chief executive Hans Joachim Müller.

Müller said he hoped to expand operations in Asia and gain a foothold in Latin America, where Azelis does not have a presence.

Founded in 2001 from the merger of French and Italian distributors, Azelis’s business extends beyond distribution. It also has a network of laboratories that test products and add new ingredients to existing products for clients.

The company expects tougher regulations in markets from animal nutrition to cosmetics to push more chemical producers to outsource distribution and formulation services to larger external providers.

Azelis laboratory
In addition to distribution, Azelis also has laboratories that test products and add new ingredients to existing products for clients © Ben Connell

Azelis generated revenues of €2.2bn last year, while its operating profit climbed 10 per cent from 2019. It employs 2,800 people across 56 countries.

Demand for chemicals has rebounded rapidly from the pandemic’s initial hit, sending valuations for the sector soaring and handing EQT a chance to capitalise.

Nouryon, the former chemicals arm of Akzo Nobel that was acquired by US buyout firm Carlyle in 2018 in a €10bn deal, is also set to go public.

Although Azelis has only a 2 per cent market share, it is enough to make it one of the sector’s largest players alongside Germany’s Brenntag, IMCD from the Netherlands and Illinois-based Univar Solutions. In a sign of investor appetite for the sector, Brenntag’s share price is at an all-time high.

Müller said that because the company’s global service centre was in Belgium, Brussels was the best place to list. It would be the largest IPO on the Brussels Stock Exchange since 2007.

EQT will retain a stake in the company following the IPO, which Azelis had considered before the Swedish private equity firm led a buyout of the business in 2018.



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Petershill/Goldman Sachs: private capital seeks paradoxical public market boost

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Goldman Sachs Group updates

Groucho Marx was suspicious of any “exclusive” club whose standards were so low he could join it. The UK’s dyspeptic long funds may have similar reservations about Petershill Partners. This offshoot of Goldman Sachs buys stakes in private equity groups and hedge fund managers. The investment bank plans to float Petershill, which may be worth about $5bn, in London. Anyone with a broking account will be able to buy shares previously only available to select Goldman clients.

The Wall Street bank will remain a gatekeeper in another respect by investing the capital of Petershill Partners in return for fees. These look generous, even though a minimum 7.5 per cent annual charge would be levied on income from investee companies, rather than on fund value.

Goldman, which is diversifying into asset management, will have earned its money if it uses its powerful network to make lucrative investments.

If you think that will happen, Petershill will be a worthwhile investment itself. If not, shrug and pass on. A stock market is a place to test business propositions. It is not a corporate Hall of Fame, though that is how London sometimes self-defeatingly seems to see itself.

Petershill invests in asset managers rather than their products. This spares end investors two tiers of management fees. Typically, it purchases minority stakes in private capital managers when they issue equity to finance expansion.

Private capital is hot at the moment. You might therefore ask why Petershill is seeking a mooted $750m from unfashionable public investors rather than that source.

The reason is that alternative asset managers from Apollo to Pershing Square prize permanent capital, which they can deploy for the long term. The stock market is a good supplier. You might also see adroit timing in Petershill’s plan to float when private capital management is, in the words of one buyout boss: “The hottest of hot spaces at the peakiest of market peaks”.

However, the mooted price of about $5bn would equate to only around 22 times estimated net income in the 12 months to June. That is a lot lower than US peer Blue Owl and quoted UK buyout group Bridgepoint, which are trading at more than 30 times forward earnings.

Routinely presented as polarities, private and public market capital remain inextricably entwined, as this deal would prove.

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