Robinhood IPO: Everything You Need To Know

Robinhood IPO is simply across the nook.

Right here’s all the pieces it’s essential to know.

Robinhood IPO: Fast Information

• Ticker: HOOD
• Providing date (date of first buying and selling): on or about Thursday, July 29, 2021, based on Renaissance Capital
• Itemizing technique: Conventional IPO
• Change: Nasdaq World Choose Market
• Supply value: Shares are anticipated to be priced between $38 and $42
• Shares provided: About 55 million shares
• Hyperlink to prospectus

What Robinhood Is Providing

Robinhood, the commission-free buying and selling app that was on the middle of this 12 months’s meme inventory buying and selling mania, confidentially submitted paperwork for its hotly anticipated preliminary public providing to the U.S. Securities and Change Fee (SEC) in March this 12 months.

The corporate later made the submitting public on Thursday, July 1.

In response to its amended S-1 submitting with the SEC, Robinhood will problem about 55 million Class A shares at a value of between $38 and $42 on the Nasdaq beneath ticker “HOOD.” The corporate may elevate practically $2.2 billion in the event that they promote the shares on the excessive finish of the value.

Current shareholders, together with its CEO and founders, are set to supply an additional 2.625 million shares within the IPO, together with 703.87 million Class A shares.

Robinhood is concentrating on a valuation of as much as $35 billion. That will give the no-fee buying and selling app a better valuation than the monetary providers titan State Avenue (STT) or the Nasdaq (NDAQ) inventory change.

Robinhood additionally stated within the submitting that it plans to order between 20% and 35% of its shares within the IPO for its customers, depending on demand from the customers and different traders.

There are 17 banks overseeing the providing, however the primary underwriters are J.P. Morgan and Goldman Sachs & Co.

In response to its prospectus, the underwriters have an possibility to purchase as much as 5.5 million shares to cowl any over-allotments.

Robinhood expects to make use of proceeds from the IPO for basic company functions and to repay debt.

About Robinhood

Robinhood was based in 2013 by two former Stanford College roommates: Vlad Tenev, 34, and Baiju Bhatt, 36.

Tenev is now the CEO of the corporate whereas Bhatt serves because the chief inventive officer. They named the corporate after the legendary outlaw in English folklore.

Each have lengthy claimed that they had been impressed by the 2011 Occupy Wall Avenue motion and got down to “democratize finance” by making inventory buying and selling simple for millennials by way of an app.

Robinhood manufacturers itself because the pioneer of “free buying and selling.” When a dealer presents free buying and selling, it merely means they don’t cost their very own charge for serving to customers to execute trades.

Nevertheless, it is very important level out that there would possibly nonetheless be different charges concerned, even should you don’t pay a fee for purchasing or promoting shares.

Robinhood additionally has a premium subscription service, often known as Robinhood Gold. It has additionally ventured into different areas like checking accounts and cryptocurrencies.

In response to PitchBook, Robinhood’s largest shareholders embody DST World, Index Ventures, New Enterprise Associates, and Ribbit Capital.

Designed To Disrupt

When Robinhood first launched its app in 2013, providing customers the flexibility to commerce ETFs and shares with no fee charges, it made a little bit of a splash.

The Menlo Park, California-based firm ended up main the best way, and different conventional brokerages like Charles Schwab and TD Ameritrade had been left with no alternative however to observe go well with.

Since its launch, Robinhood has attracted tens of millions of younger merchants to the inventory market quick, utilizing a gross sales pitch of zero commissions and account minimums.

The app just isn’t solely simple to make use of but additionally has an inviting interface. However this has drawn criticism from individuals who have in contrast it to a cellular recreation or a social media app.

Some critics say that Robinhood encourages customers to commerce extra incessantly than they need to due to the game-like options it has included within the app.

Research present that extreme buying and selling usually results in worse outcomes for inventory merchants.

A Fast Look At Robinhood’s Funds

In response to the IPO paperwork that Robinhood submitted to the SEC, the corporate now has 18 billion in property beneath custody and a complete of 17.7 million month-to-month energetic customers.

As well as, roughly 18 million folks use its buying and selling app to purchase and promote cryptocurrencies and shares.

Within the first quarter of 2021, the corporate generated income of $420 million in contrast with income of $96 million a 12 months in the past.

Web loss got here in at $1.4 billion throughout that interval, versus a web lack of $53 million throughout the identical interval final 12 months. Robinhood attributed the huge web loss to the $3.5 billion debt which it raised in February.

For the 12 months ended Dec. 31, 2020, the corporate posted a revenue of $7 million and has recorded income in two out of the previous 9 quarters.

How The Firm Makes Cash

Robinhood derives most of its income from order flows i.e., routing trades to high-speed buying and selling corporations comparable to Virtu or Citadel Securities.

These corporations then pay the dealer a small charge for the shares which can be routed and this could add as much as tens of millions of {dollars} when customers commerce actively.

In response to an evaluation of firm filings by JMP Securities, Robinhood and rivals together with E*Commerce, Charles Schwab, and TD Ameritrade acquired about $2.6 billion in funds for inventory and possibility orders.

Robinhood’s Progress: Fast Information

Robinhood has talked about the phrase “development” greater than 200 occasions in its submitting with the SEC. As we talked about earlier than, the corporate had roughly 18 million customers within the January-March quarter, which represents a 107% enhance from the identical interval a 12 months in the past.

In response to Matthew Kennedy, senior strategist with Renaissance Capital, first-time traders are prone to stick to Robinhood for a very long time.

“What stands out to me is their development and the truth that prospects are first-time traders,” he tells MarketWatch.

Robinhood And The GameStop Saga

Regardless that Robinhood has grown to develop into one of the vital useful personal firms in Silicon Valley, the app has additionally endured loads of challenges significantly in 2021.

Initially of the 12 months, Robinhood was already being compelled to lift $3.4 billion of a liquidity disaster brought on by the “meme-stock” buying and selling frenzy that noticed many retail merchants pile on GameStop (GME) and different shares with excessive quick curiosity.

Consequently, the corporate quickly restricted customers from promoting sure meme shares, a choice that triggered an enormous backlash from its customers and a few lawmakers on Capitol Hill.

Robinhood customers accused the corporate of siding with Wall Avenue elites on the expense of informal merchants.

Some customers additionally joined a class-action lawsuit in opposition to the corporate, saying it manipulated the inventory market by limiting sure merchants, thus inflicting them to incur losses.

In December 2020, Robinhood was additionally slapped with a $65 million superb which the corporate paid to the SEC for deceptive customers about the way it generates its income.

SEC officers stated that between 2015 and 2018, the dealer didn’t totally make it public that it was getting paid to route order flows to market makers or that it was executing buyer orders at costs decrease than of rival brokers.

Backside Line

Regardless of its justifiable share of controversies, Robinhood is clearly an incredible firm.

It is without doubt one of the hottest apps to have emerged in recent times that attempt to reinvent the beforehand unadventurous world of inventory buying and selling for the smartphone period.

Its promise of zero-commission inventory trades has helped the corporate to develop its subscriber base and valuation.

As Robinhood now prepares to hit public markets after months of teasing traders, it appears poised to develop with the brokerage business.

However most merchants can be well-advised to tread cautiously, watch the efficiency of the corporate, and – if – await a extra enticing entry level.