Robinhood, gateway to meme stocks, raises $ 2.1 billion in IPO

July 28 (Reuters) – Robinhood Markets Inc, owner of the trading app that has become the go-to destination for retail investors speculating on this year’s “memes” market frenzy, has raised $ 2.1 billion during its initial public offering on Wednesday.

The company was looking to capitalize on individual investors’ fascination with cryptocurrencies and stocks such as GameStop Corp (GME.N), which have seen wild swings after being the subject of trade speculation on social media sites. such as Reddit. Robinhood’s monthly active users fell from 11.7 million at the end of December to 21.3 million at the end of June.

The IPO valued Robinhood at $ 31.8 billion, making it superior in terms of its income than many of its traditional rivals such as Charles Schwab Corp (SCHW.N), but the offer is falling. was at the bottom of the range indicated by the company.

Some investors have remained on the sidelines, citing concerns about the foamy valuation, the risk of regulators cracking down on Robinhood’s business, and even lingering anger at the company’s imposition of trade restrictions when the stock trading frenzy took hold. erupted at the end of January. Read more

Robinhood said it sold 55 million shares on the IPO at $ 38 apiece, the low end of its $ 38 to $ 42 price range. This makes it one of the most valuable US companies to have been publicly traded since the start of the year, amid a hot market for new listings.

In an unusual move, Robinhood said it would reserve between 20% and 35% of its shares for its users.

Robinhood’s platform allows users to perform unlimited commission-free transactions in stocks, exchange-traded funds, options, and cryptocurrencies. Its simple interface made it popular with young investors trading from home during the COVID-19 pandemic.

Robinhood angered some U.S. investors and lawmakers earlier this year when it restricted trading in some popular stocks following a 10-fold increase in filing requirements at its clearinghouse. It has been at the center of many regulatory surveys.

The company revealed this week that it had received requests for regulation from the United States on whether its employees traded in GameStop and AMC Entertainment Holdings, Inc (AMC.N) shares before the trading restrictions were cut. be placed at the end of January.

In June, Robinhood agreed to pay nearly $ 70 million to settle an investigation by Wall Street’s own regulator, the Financial Industry Regulatory Authority, into “systemic” failures, including system failures, the supply of “false or misleading” information and weak options trading controls.

The brokerage has also been criticized for relying on “payment for order flow” for most of its income, whereby it collects fees from market makers for routing trades to them. and does not charge users for individual transactions.

Critics argue that this practice, which is used by many other brokers, creates a conflict of interest, on the grounds that it prompts brokers to send orders to whoever pays the highest fees. Robinhood argues that it routes transactions based on what is cheapest for its users and that charging a commission would be more expensive. The United States Securities and Exchange Commission is reviewing the practice.

Robinhood was founded in 2013 by Stanford University roommates Vlad Tenev and Baiju Bhatt. They will hold the majority of the voting rights after the offer, according to the documents, with Bhatt owning around 39% of the voting rights of the outstanding shares while Tenev will own around 26.2%.

The company’s shares are expected to start trading on the Nasdaq on Thursday under the symbol “HOOD”

Goldman Sachs and JP Morgan were the major underwriters in Robinhood’s IPO.

Reporting by Echo Wang and David French in New York; Editing by Leslie Adler

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