Controversial trading app Robinhood, which was at the centre of a retail-trading frenzy that gripped Wall Street this year, plans to raise up to $2.3bn in an initial public offering.
Robinhood, which plans to list on the Nasdaq under the ticker symbol “HOOD,” anticipates selling 55 million shares for between $38 and $42 apiece, giving it a valuation of $35bn. Goldman Sachs and JP Morgan are the lead underwriters for the offering.
That would make Robinhood more valuable than about two-thirds of the S&P 500, putting it somewhere near Yum Brands, Corning and HP. If Robinhood achieves the $35bn valuation target, it will represent a threefold increase since September 2020, when the company was valued at $11.7bn at a private equity fundraising. The shares are expected to be priced between $38 and $42, the company said.
Founders Vlad Tenev and Baiju Bhatt will hold a majority of the voting rights after the offering, the filing showed, with Bhatt having about 39% of the voting power of outstanding stock, while Tenev will hold about 26.2%.
Salesforce Ventures, the investment arm of software provider Salesforce.com Inc, is looking to purchase up to $150m worth of Class A common stock at the IPO price, the filing showed.
The company’s platform allows users to make unlimited commission-free trades in stocks, exchange-traded funds, options and cryptocurrencies. Its easy-to-use interface made it a go-to for young investors trading from home during coronavirus-induced restrictions.
The IPO comes despite a flurry of legal and public relations troubles for Robinhood. The company’s business model was under scrutiny from regulators following the GameStop trading saga. Robinhood was criticised after it curbed trading in the middle of the surge in GameStop’s shares as it struggled to cope with demand. At the time, Robinhood was forced to raise $3.4 billion in emergency funds after its finances were strained by the massive jump in retail trading and a resulting jump in capital demands from clearing houses.
Watchdogs argued that Robinhood’s reliance on payment for order flow, where it receives revenue for routing trades to high-speed traders, is rife with conflicts of interest. Last month, Robinhood was slapped with the largest-ever fine from Wall Street’s self-regulator over allegations it misled investors. Robinhood recently reached a settlement with the family of Alexander Kearns, a 20-year-old trader who died by suicide in 2020 after seeing a negative balance of $730,000 in his Robinhood account and mistakenly believed he owed that amount.
Despite a series of controversies, Robinhood is growing rapidly as retail investors pile into the stock market boom. Robinhood estimated it has 22.5m funded accounts, up from 18m in the first quarter of 2021. The California-based company said its second-quarter 2021 revenue would be between $546m and $574m, a 129% increase from the same period a year earlier. Its revenue spiked 245% to $959m last year.
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