Trading app Robinhood has quoted a share price of $38 ahead of its initial public offering (IPO) on Thursday, towards the lower end of its target range.

The offering price gives the company a valuation of $31.7bn as it prepares to begin trading on the Nasdaq exchange.

The trading app has doubled its user base since January 2021 to 31m.

The app, whose stated mission is to ‘democratise finance’, has proven popular with young people whose spending options have been limited by the pandemic and who trade small amounts relative to larger investors.

The company has attracted this captive market on the back of commission-free trades, a slick user interface and offering more complex securities like options and derivatives.

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Some 80% of Robinhood’s revenues come from directing trades on its platforms to certain market makers over others, a controversial practice known as ‘payment for order flow’.

In an unusual move, the company is allocating 35% of its offering shares to its own customers.

This decision may go some way to explaining the relatively slack institutional investor demand for Robinhood shares. These funds usually hope that the initial price will shoot up once trading commences as retail investors not involved in the IPO clamour to buy the shares.

Given the large initial allocation of shares to retail investors, seasoned investors are sceptical such a ‘pop’ will occur.

Analysts also caution that the company may face other headwinds in the months and years ahead.

Many financial regulators share the view of Warren Buffett that the app’s features are predatory and pander to gambling addicts.

The future legal status of payment for order flow is uncertain in the United States and elsewhere. And as economies gradually reopen the company may not be able to maintain the breakneck growth in its customer base.

Investors also fret about the high level of voting control the company’s two founders Baiju Bhatt and Vlad Tenev will maintain after the company goes public. The co-founders would own shares worth $5bn but maintain a minimum of 65% of the voting rights.

In other quarters, Robinhood's IPO was welcomed as an opportunity for the company to continue its efforts to expand financial inclusion.

CEO of mobile brokerage company BUX Yorick Naeff said: "The Robinhood IPO is a significant moment for the new investment or neo-brokerage space, which highlights the opportunities, as well as the challenges we are currently facing.

"With many macroeconomic factors at play, not least low interest rates and unsustainable pension systems, younger generations need to diversify their revenue streams through activities like investing in order to build a better financial future."