SAN FRANCISCO/NEW YORK (Financial Times) — According to persons familiar with the plans, Robinhood, the online brokerage linked to a spike in retail day trading, is aiming for a valuation of $40 billion or more in its initial public offering. The business issued its fundraising prospectus on Thursday. Robinhood’s revenues more than tripled to $959 million last year, from $278 million the year before, according to a regulatory filing, and the company’s extraordinary expansion continued in the first quarter of this year. The platform’s registered users have more than doubled to 31 million since the start of 2021, according to the company. At the conclusion of the first quarter, 18 million accounts were funded, rising 151% from the end of 2020. It made $522 million in revenue in the first three months of the year, up 309% over the same period the previous year. The prospectus comes a day after Finra, the US regulator, slapped the broker with its highest-ever penalties, $70 million, for inflicting “widespread and serious harm” to its customers. Technical issues on the platform during periods of high volatility were among the failures, according to Finra. In late January, a spike in trade in “meme stocks” like GameStop led the platform to cease trading in several shares, putting the brokerage’s finances under strain. At the time, Robinhood was racing to raise $3.5 billion from investors, resulting in a $1.4 billion loss for the quarter. For the whole year of 2020, it earned $7 million in net income. Investors who purchased convertible notes released in February, which would convert into equity at a discount of at least 30% to the offer price, will be particularly interested in the IPO valuation. The conversion is capped at a valuation of around $30 billion for the most senior debtholders, meaning that the higher the IPO price above $43 billion, the greater the gain from rescuing the company. The rapid development of Robinhood has drawn increased regulatory scrutiny, and Vlad Tenev, the company’s co-founder and CEO, was invited to appear before Congress regarding the January trading restrictions. The prospectus stated that it had received subpoenas relating to the restrictions, and that federal authorities had obtained Tenev’s phone through a search warrant. According to the prospectus, the company is also being investigated by the California attorney general’s office, and it has set aside at least $15 million for fines in the case of a money laundering complaint brought by New York’s Department of Financial Services./n
Read More
