Robinhood files confidentially for IPO despite disastrous start of 2021

Robinhood files confidentially for IPO despite disastrous start of 2021

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The IPO’s confidential filing suggests that Robinhood plans to capitalize on the flurry of retail negotiations that the startup helped unleash with its zero-commission business model.
Robinhood chose Nasdaq to list its shares, a separate source familiar with the matter told CNN Business. The news of the confidential IPO application was first reported by Bloomberg News.

A spokesman for Robinhood declined to comment.

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

Eventually, Robinhood will be forced to disclose these figures so that investors can assess the company’s growth trajectory and the main risks. It will take at least several months before the S-1 process is made public, one of the sources told CNN Business.

The GameStop saga sparked a cash crisis

Robinhood unleashed a storm in January, when he temporarily banned users from buying GameStop shares and other shares driven by an army of traders on Reddit. Robinhood blamed the controversial restrictions on his clearinghouse’s demand of up to $ 3 billion due to market volatility.

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

The episode raised questions about Robinhood’s business model and management team and tested brand 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 mistakenly believing that that was the sum of money he owed. The tragedy drew attention to the gamified nature of the Robinhood platform and the startup’s customer service deficiencies.

Red-hot markets

In normal times, Robinhood’s stumbles can condemn an ​​IPO, raising questions about whether the company is ready for the limelight. But these are not normal times.

The very low interest rates, combined with the increased interest of retail investors and optimism about the economic recovery, triggered a boom in the financial markets. US stocks are trading near record levels, valuations are high and signs of foam abound in the market.

Investors are pouring money into blank check companies known as SPACs, a trend that has recently been supported by professional athletes and other celebrities. Traditional IPOs are also on the rise.

Listed traditional IPOs in the United States have raised $ 34.9 billion so far in 2021, almost five times what they raised in the same period last year, according to Dealogic statistics from March 19. That is the highest value for this year in any year since 1995.

A great player puts on the brakes in the latest Wall Street fashion

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

The first day’s average pop for listed IPOs in the United States is 44%, the highest since the dot-com bubble in 2000, according to Dealogic.

A key question for investors looking at Robinhood’s books will be how his explosive growth in users has been affected – if at all – by the GameStop saga.

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

This is a developing story.

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