Robinhood, the wildly popular stock-trading app that’s made it easy to throw fistfuls of money at meme stocks while also occasionally locking those users out of trades on a whim, is ready to cash in big time.
According to an updated prospectus on Monday, the company is heading for an initial public offering aiming for a price target of $US38-42 ($51 – $57) a share, which would raise billions from investors at a valuation of $US27 ($36) to $US35 ($47) billion. CNN Business reported that would make Robinhood worth more than two-thirds of companies on the S&P 500 and put it in the neighbourhood of companies like Yum Brands (operator of KFC, Pizza Hut, Taco Bell, and other restaurants) or HP.
Unlike many tech companies trying for explosive IPOs, Robinhood is already profitable, coming in at just above even on $US959 ($1,296) million in revenue in 2020. Co-founders Vlad Tenev and Baiju Bhatt plan to sell around 2.6 million shares; CNN Business wrote the IPO would ultimately result in Tenev controlling 7.9% of outstanding stock and 26.2% of voting power, while Bhatt would retain the same amount of stock and 39% of voting power.
The IPO is expected imminently and public trading in Robinhood stock may begin on Nasdaq by the end of next week, according to the New York Times.
Robinhood may be raking in revenue, but it’s also facing regulatory scrutiny and in the last year has infuriated large swathes of its userbase. On multiple occasions, Robinhood has experienced outages that prevented users from making trades, and on other occasions, it has barred trades in certain hot stocks or cryptocurrencies for periods of time. That’s resulted in some users losing large amounts of money, and some of them have accused Robinhood of caving to outside pressure from hedge funds to manipulate the market and shield the big boys from losses when trading volume on the app threatens their interests.
Users have filed hundreds of U.S. Federal Trade Commission complaints against Robinhood, claiming the company’s customer support teams are worthless and do not act quickly to assist users screwed over by technical problems or trading halts. Both the U.S. Financial Industry Regulatory Authority and U.S. Securities and Exchange Commission have slapped it with fines for misleading customers; the SEC is also wary of the company more generally and may target one of its core practices, payment for order flow.
According to Bloomberg, Robinhood has rushed to hire former top regulatory officials in what looks like an effort to smooth over the lumps from compliance problems it’s shoved under the rug without changing their business model, including a highly unusual $US30 ($41) million job for former SEC Commissioner Dan Gallagher.