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An IPO would allow Robinhood to raise fresh capital and access financing.
AFP via Getty Images
Robinhood Markets, the trading app under scrutiny
GameStop
trading is moving forward with plans to go public, said four bankers and venture capitalists.
The startup’s IPO plans are on track and an offer is expected in the coming months, likely in the second quarter, three of the people said.
“The [Robinhood] IPO is in full swing ahead, ”said one of the bankers.
Goldman Sachs
(ticker: GS) advises on the offer, one of the people said.
An IPO would allow Robinhood to raise new capital, while giving the company, one day public, access to finance, people said. Robinhood was forced to raise $ 3.4 billion in the past week after a shopping frenzy forced the trading platform to increase the money it deposited at the clearing houses that process its transactions.
Executives for Robinhood and Goldman declined to comment.
Founded in 2013, Robinhood offers commission-free trading of stocks, ETFs, options and cryptocurrencies, as well as margin, according to PitchBook. The company sends client orders to market makers such as Citadel Securities, Virtu Americas and G1X Execution services. In 2020 it had 1,281 employees.
On Monday, Robinhood said it added another $ 2.4 billion in a round led by
Ribbit Capital.
That funding came after the startup raised $ 1 billion from current investors last week.
The Menlo Park, Calif., Company has come under pressure following Robinhood’s limited trading in GameStop (ticker: GME) and other stocks. The move caused outrage among its customers, investors and on Wall Street. Even Rep. Alexandria Ocasio-Cortez (DN.Y.) and other lawmakers continued to write
Twitter
that Congress should look deeper into Robinhood’s actions.
Robinhood tried to explain its actions, claiming that clearinghouse requirements are pushing the company to restrict trading in certain stocks, according to a January 29 blog post. The company said clearinghouse-imposed deposit requirements had risen to 10 times the normal number and Robinhood “needed to take steps to limit the buying of those volatile securities to ensure we could comfortably meet our requirements.”
The anger over Robinhood’s tactics did not diminish its popularity. The app was downloaded more than a million times last week. This prompted a hedge fund manager to say that Robinhood’s IPO will likely still be a winner. “If they have growing users and have a plan to address the PFOF issues with Citadel, I think they can still go out with some Twitter haters,” said the director.
PFOF refers to payment for order flows. Transactions on Robinhood are sold to market makers or large corporations such as Citadel.
An IPO would mean an exit for Robinhood’s many investors. They include D1 Capital Partners, Sequoia Capital, NEA, 9 Yards Capital, and Unordinary Ventures. Some of Robinhood’s early donors, such as Index Ventures, Draper Associates, and Andreessen Horowitz, entered the company’s $ 3 million seed round in 2013.
Index Ventures and Draper declined to comment. Ribbit, Sequoia, NEA, 9 Yards and Andreessen did not return messages for comment.
Write to Luisa Beltran at [email protected]