Robinhood applies confidentially for IPO despite disastrous start to 2021

Robinhood applies confidentially for IPO despite disastrous start to 2021

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The confidential IPO filing indicates that Robinhood intends to capitalize on the spate of retail that helped the startup with its business model without commission.
Robinhood has chosen Nasdaq to list its shares, a separate source familiar with the matter told CNN Business. The news of the confidential IPO filing was first reported by Bloomberg News.

A Robinhood spokesman declined to comment.

Other prominent start-ups, including Airbnb, Lyft, Slack and Palantir, have filed for bidding. With this route, companies can submit a registration statement, known as an S-1, privately to the SEC for review – without disclosing their financial details for the time being.

Ultimately, Robinhood will have to disclose the numbers so that investors can evaluate the growth path and key risks of the company. It will take at least a few months before the S-1 submission is made public, one of the sources told CNN Business.

GameStop saga caused cash crises

Robinhood started a firestorm in January when it temporarily banned users from buying shares of GameStop and other shares driven by an army of traders on Reddit. Robinhood blames the controversial restrictions on its clearing house’s claim of as much as $ 3 billion due to market volatility.

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

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 by suicide after seeing a negative balance of $ 730,000 in his trading account and mistakenly believing it was the sum of money he owed. The tragedy drew attention to the playful nature of the Robinhood platform and the lack of customer service from the startup.

Red hot markets

In normal times, Robinhood’s stumbling block can drive a stock market, raising questions about whether the company is ready for the spotlight. But these are not normal times.

The lower interest rates, coupled with rising investor interest and optimism about the economic recovery, have given rise to a boom in the financial markets. US stocks are trading near record highs, valuations are high and signs of market froth are plentiful.

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

According to genealogical statistics from March 19, traditional listed investments have raised $ 20.9 billion in 2021 so far in 2021. This is the highest for this point of any year since 1995.

A major player applies brake on Wall Street's latest fad

Over the past six months, major companies including Coupang, Bumble, Snowflake, Airbnb and DoorDash have skyrocketed in their first trading day.

The average first-day doll for listed stockholders is 44%, according to Dealogic the highest since the dotcom bubble in 2000.

An important question for investors to examine Robinhood’s books is how the explosive growth of users has been affected – if at all – by the GameStop saga.

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

This is an evolving story.

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