Robinhood Markets, the investment app, is going public next week with an offer of 55 million shares at $38 to $42 each. It will list under HOOD on the Nasdaq Dubai. At $42 a share, Robinhood could be valued at $35 billion.
Robinhood is scheduled to trade on July 29, according to sources in the know.
Robinhood was launched in 2013 and has made trading accessible to the common man through its no-commission direct access to stocks and investments.
The Menlo Park, California, company reached the top spot on the App Store and managed a $30 billion valuation funding round. It gained around 3 million new users last year. The app sends customer orders to market makers like Citadel Securities, Virtu Americas, and G1X Execution services. It employed 1,281 people in 2020.
Robinhood competes against big-time brokers like Charles Schwab, TD Ameritrade, Fidelity Investments, and Interactive Brokers Group. These firms have eliminated online trading commissions as well.
IPO Access with the Trading App by Robinhood
Robinhood has recently allowed users of its trading app to apply for IPOs. The trading start-up is trying to make IPOs accessible for retail investors and allow customers to buy shares of companies at their offering price, with no minimums required. The IPO Access feature on Robinhood is only available to a certain number of investors selected randomly. The company is setting aside as much as 35% of its shares in the IPO for sale to Robinhood customers through its IPO Access feature, the prospectus said.
The app will give access to Outbrain, an adtech company, and Duolingo, a language-learning website and app, stocks along with Robinhood. However, it is unclear how many of each company’s shares are available to Robinhood’s customers.
According to its prospectus filed with the SEC, Robinhood estimates revenue to increase by about 129 per cent year-on-year between $546 million to $574 million in its second quarter ended June 30, more than double the $244 million in 2020’s second quarter. In addition, it expects assets under its custody to grow to $102 billion – more than trebling from $33 billion a year earlier.
The trading app also foresees losses of between $487 million to $537 million due to changes in the value of convertible notes and warrants after its $3.4 billion fundraise in February.
The company also anticipates adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, to come in between $59 million to $103 million, according to the filing.
About 52.4 million shares are on offer from Robinhood. A major chunk is being put up by co-founders Vladimir Tenev and Baiju Bhatt, who are each selling 1.25 million shares. Jason Warnick, chief financial officer, is selling 125,000 shares. CEO Tenev and Bhatt will own a combined 100% of Class B stock. Tenev will have 26.3% of total voting power after the IPO; Bhatt will have 39%.
“We’re proud to serve this next generation of investors and it’s painful to see them continually lambasted in the news reports. Anecdotes of people winning (and losing) large amounts of money garner more attention than the pedestrian truths – the majority of our customers like to buy and hold,” co-founders Vlad Tenev and Baiju Bhatt said in an introductory letter to the company’s prospectus.
Next Gen onlookers are stocking large amounts into venture ideas for healthy investments.
The company has faced regulatory scrutiny and paid up $65 million to the SEC in December to settle a case brought against it for “repeated misstatements” that failed to declare to its customers that it was being paid to route their orders through certain brokers. It was also caught up in the GameStop meme stock frenzy fueled by the Reddit community, forcing it to stop trading certain stocks.
“We expect to continue to be subject to such proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business,” the Robinhood prospectus said.
Robinhood raised $11.7 billion in September last year through a late-stage (Series G) funding round. It raised $660 million from investors, including venture capital firms Andreessen Horowitz, Sequoia Capital and D1 Capital Partners. Index Ventures will own 4.2% of the shares of Robinhood, and New Enterprise Associates will have 3.7%, Ribbit will hold 3.1% and DST Global 2.9%.
Goldman Sachs and J.P. Morgan are the lead underwriters on the deal.