Robinhood files confidentially for IPO despite disastrous start to 2021

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The confidential IPO filing suggests Robinhood plans to capitalize on the flurry of retail that helped the startup with its no-commission business model.
Robinhood has selected Nasdaq to list its shares, a separate source familiar with the issue against CNN Business said. News of the confidential IPO filing was first reported by Bloomberg News.

A Robinhood spokesperson declined to comment.

Other prominent startups, including Airbnb, Lyft, Slack and Palantir, filed a confidential request to go public. That route allows companies to privately file a registration statement, known as an S-1, with the SEC for review – without disclosing their financial details for the time being.

Ultimately, Robinhood will have to release these numbers so investors can assess the company’s growth trajectory and key risks. It will take at least several months for the S-1 filing to be made public, one of the sources told CNN Business.

GameStop saga sparked money crisis

Robinhood sparked a firestorm in January when it temporarily banned users from buying GameStop stock and other stocks fueled by an army of traders on Reddit. Robinhood blamed the controversial restrictions on a demand from its clearing house to raise as much as $ 3 billion due to the volatility of the market.

Robinhood was forced to quickly withdraw its lines of credit and quickly raise $ 3.4 billion, underscoring the apparent liquidity crisis facing the startup.

The episode raised questions about Robinhood’s business model and management team and tested the brand’s loyalty among users.

Robinhood was also sued earlier this year by the family of a 20-year-old trader who died of suicide after seeing a negative balance of $ 730,000 in his trading account and falsely believed it to be the amount he owed. The tragedy drew attention to the gamified nature of the Robinhood platform and the startup’s shortcomings in customer service.

Red-hot markets

Under normal times, Robinhood’s stumbling blocks can cause an IPO to fail, raising questions about whether the company is ready for the spotlight. But these are not normal times.

The lowest interest rates, combined with rising interest from private investors and optimism about the economic recovery, have led to a boom in the financial markets. US stocks are trading at record highs, valuations are high and there are abundant signs of market foam.

Investors are pouring money into blank check companies known as SPACs, a trend recently supported by professional athletes and other celebrities. Traditional IPOs are also very popular.

US-listed traditional IPOs have raised $ 34.9 billion so far in 2021, nearly five times as much as the same period last year, according to Dealogic statistics on March 19. That is the highest for this point in any year since 1995.

A major player is slowing down the latest Wall Street craze

In the past six months, major companies including Coupang, Bumble, Snowflake, Airbnb and DoorDash have all skyrocketed on their first day of trading.

The first-day average population for publicly traded IPOs in the US is 44%, the highest since the dotcom bubble in 2000, according to Dealogic.

An important question for investors scrutinizing Robinhood’s books is how the explosive user growth was affected – if at all – by the GameStop saga.

Despite the controversy, January was a near record month for downloading Robinhood apps, according to a late January report by JMP Securities.

This is a story in progress.

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