Is Robinhood Ready to IPO in 2021?
One of Silicon Valley’s most valuable companies, Robinhood, could be gearing up for its IPO.
The free trading app company has been putting things into place to prepare for a potential public debut in the upcoming months. If you didn’t know about the company before this year, I’m sure you have some idea about it now, especially after everything that happened with GameStop (NYSE: GME) in the early months of 2021 — and is currently happening with some other “meme stocks.” The hype from Reddit and Twitter users caused the stocks of some companies, like GameStop and AMC (NYSE: AMC), to rally to highs that a year ago no one would have imagined.
In recent months, Robinhood has received criticism, as some say that it has made it too easy to trade — arguing that the company has turned the investment process into gambling. However, the company believes that it’s appealing to the millennial and Gen Z population who are looking to invest. These generations grew up with smartphones and instantaneous results, so having a trading app to appeal to the future generations of investors can have its benefits.
This year alone, Robinhood has been dealing with backlash from its popularity and its company mission. So far this year the company has had to navigate through a congressional hearing, trading outages, some bad publicity, and customer backlash. But the company has managed and it’s still in a position where it’s still aiming for that long-awaited IPO, which could be a multibillion-dollar offering. Robinhood has been valued at near $11 billion, and with its IPO that valuation is expected to grow to at least three times that. Robinhood's financials have soared in the first quarter of 2021 — the company has reported its biggest revenue source more than tripling.
Robinhood is keeping in line with its mission of making it easy for everyday people to invest by announcing that it will be giving investors using its app access to initial public offering shares. Historically, it has been difficult for retail investors to invest in an IPO. IPO shares are usually set aside for Wall Street’s institutional investors or high-net-worth investors. Retail investors don’t really get the option to take advantage of IPOs. Robinhood said in a blog post:
We’re starting to roll out IPO Access, a new product that will give you the opportunity to buy shares of companies at their IPO price, before trading on public exchanges. With IPO Access, you can now participate in upcoming IPOs with no account minimums.
A recent IPO from Figs (NYSE: FIGS) — a medical scrubs retailer — was the first to use Robinhood’s IPO Access. Figs filed its IPO paperwork with the SEC ahead of its IPO, saying:
We currently anticipate that up to 1% of the shares of Class A common stock offered hereby will, at our request, be offered to retail investors through Robinhood Financial LLC as a selling group member, via its online brokerage platform.
The company added:
This is the first initial public offering to be included on the Robinhood platform, and there may be risks associated with the use of the Robinhood platform that we cannot foresee, including risks related to the technology and operation of the platform and the publicity and the use of social media by users of the platform that we cannot control.
Robinhood’s IPO Access is unique for a brokerage service, especially one that most likely directed to its targeted audience — millennials and Gen Z. Having this type of access to IPO shares could be the company setting its users up to take part in its upcoming IPO shares, which could be helpful to Robinhood. In addition to creating this new IPO service for its app, Robinhood has named three new directors to its board. The new Robinhood board members are former Apple Inc. and Bridgewater Associates executive Jon Rubinstein, along with PricewaterhouseCoopers LLP partner Paula Loop and former World Bank president Robert Zoellick. This has speculations circulating that an IPO for Robinhood could happen before the close of 2021. It filed its IPO paperwork with the SEC back in March, and inside that paperwork Robinhood indicated that it has chosen the Nasdaq as its exchange to trade on when it does make its market debut.
An IPO from Robinhood will nonetheless be very entertaining to witness. The company has even more attention being drawn to it, and some criticism continues to build from veteran investors and lawmakers. As a public company, Robinhood will have an even bigger spotlight.
Until next time,
Pro Trader Today