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A March IPO for Robinhood?

Written by Monica Savaglia
Posted March 2, 2021

The popular trading platform Robinhood has been the topic of many discussions over the past month, especially with all the news involving GameStop (NYSE: GME) and its unexpected rally. Well, it appears that the company could be benefiting from that publicity and riding the tailwinds of the rally by possibly announcing its filing and a soon-to-be public offering.  

An IPO from Robinhood has been highly anticipated for a few years now. Just when you think the company has everything in order and it’s going to announce that it has filed its S-1 with the SEC — it doesn’t. There were rumors that Robinhood could go public in 2020, but as you already know a lot of what we expected out of 2020, unfortunately, didn’t come to fruition. With that being said, we know that the IPO market had an incredible second half of the year in 2020. That’s when I started to hear those whispers of how Robinhood could have a 2021 IPO.

This could be the perfect timing for the company to decide to go public. Robinhood has been linked with current events in the stock market that now most everyone knows about. As I said earlier, the company has received a lot of recent publicity surrounding GameStop’s rally and the involvement of the subreddit thread r/wallstreetbets. Most of those Reddit users were using Robinhood as their brokerage platform since it is easily accessible for everyday investors. If you weren’t familiar with the trading platform before, you most likely know about it now. The name Robinhood is fresh in everyone’s minds, especially potential investors who could be looking at its public offering with even more interest.

Bloomberg has reported on recent speculation that the California-based company has been holding discussions with underwriters so it can move forward with a filing in the coming weeks, which leads me to believe that a March filing for the company could be in sight. Last year, Reuters reported that Robinhood had picked Goldman Sachs Group to lead preparations for an initial public offering, which could value Robinhood at more than $20 billion. 

While current events have helped Robinhood become a household name to people who aren't very familiar with the stock market or trading. Now these people who were uncomfortable with investing have created Robinhood accounts and are trying to become trading-savvy after seeing people like them make money. Some of these people probably felt like they'd never have access to the stock market because maybe they weren't "smart" enough or had enough money, but now they see that's not totally accurate. 

All this attention has shone a light on how platforms like Robinhood should operate to ensure that users aren't caught in a situation that they can't recover from. Just a few weeks ago, Robinhood experienced a cash crunch and since then has faced regulatory inquiries like a hearing by the House Financial Services Committee, which resulted in Robinhood having to draw down its credit lines and post more collateral with the Depository Trust & Clear Corp. (DTCC) — the industry's clearinghouse. The DTCC did this to make sure that trades could be cleared given the circumstance of wild swings in stocks. 

Robinhood is also facing some backlash because of its reaction to these recent events. The platform temporarily curbed trading in GameStop and other stocks, which had some customers and politicians scrutinizing the company and its platform. So while all the attention brought to the company in recent months has made Robinhood more popular (which most likely resulted in new users), it has also shed a regulatory light on how platforms like Robinhood should operate so they can continue to in the stock market world.

According to estimates from JMP Securities, the free-trading app gained 3 million users just last month. Greg Martin, managing director and co-owner at Rainmaker Securities, said:

From a brand recognition perspective, who doesn't know who Robinhood is? Despite some private and negative press, everyone in the world knows who Robinhood is. They couldn't have better free advertising.

The company pioneered zero-commission trading and has become a platform for new and young investors, giving them access to the markets — that alone is groundbreaking. In a funding round last year, Robinhood was valued at $11.7 billion, but that valuation could be even higher now, as much as $40 billion.  Robinhood's co-founder and CEO Vlad Tenev recently told Congress that the company had delivered more than $35 billion in realized gains to investors. He also stated that the platform's average account size is about $5,000.

When Robinhood chooses to go public, it could do things a little differently and more in line with the company's ethos. It may consider selling some of its IPO shares directly to its customers, which would be unusual, as retail investors rarely get the chance to participate in a company’s IPO.

Again, a lot of this is all speculation at this point, but a public offering from Robinhood in the next month or so would make sense. There's no better time to do it than now, especially if this is truly the company's next step. 

For more information on Robinhood's potential public offering, other upcoming IPOs, and news on the IPO market, click here.

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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