After getting roasted for its role in the January market meltdown and hauled before Congress in February, Robinhood is reportedly angling to go public in March.
The no-fee trading app for millennials is eyeing an initial public offering later this month and plans to file confidential IPO paperwork with the Securities and Exchange Commission in the coming days, according to a report from Bloomberg that cited unnamed sources (paywall).
It was widely reported that Robinhood had hired Goldman Sachs to do its IPO last year. Goldman didn’t immediately respond to a request for comment.
Valued at $11.7 billion after a funding round last September, Robinhood is hoping to convert some of that financing into equity. A first tranche will convert at a $30 billion valuation or a 30 percent discount to the IPO, whichever is lower, Bloomberg reported.
The company also has considered selling shares in its IPO directly to its own users, according to the report. That could be a possible olive branch to day traders who got burned by the app’s clampdown on buying and selling GameStop and other “meme stocks”.
Robinhood cracked down in order to appease its clearinghouse — a move that sparked outrage and accusations that the app was conspiring with the Wall Street firms that pay Robinhood for the right to execute its trades, claiming that they worked together to kill the manic short squeeze.
“You know everybody here who’s watching this hates your guts, right?” Bartool Sports founder Dave Portnoy — who has become a hero for day traders during the pandemic — told Robinhood CEO Vlad Tenev in a Feb. 24 interview. “You killed the little guy.”
Tenev admitted to members of Congress that mistakes were made during his testimony a week earlier, but defended his decision to prevent users from trading the meme stocks while he sought $3.4 billion in emergency liquidity to meet his capital requirements in the chaos of the Reddit Rally.
As a public company, Robinhood would have access to the kind of market liquidity that could make situations like that easier.
But in addition to the Reddit Rally fiasco, Robinhood’s most recent regulatory filing disclosed that the company might pay more than $26 million in regulatory fines to the app’s multiple service outages in 2020 that left customers fuming and unable to communicate via a help line, the lack of which is a violation of a Financial Industry Regulatory Authority rule.
The company also admitted that FInra and the SEC are probing its role in the 2020 suicide of an amateur options trader who blamed his decision on losses on his Robinhood account in a note he left behind for his family.
In December, Robinhood paid $65 million to settle charges from the feds that it misled users about how it was making money and failed to deliver the best execution it had promised on trades.