Robinhood is confidentially sending for the IPO, despite the disastrous start to 2021

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The IPO’s confidential filing suggests that Robinhood intends to capitalize on the wave of retail trading that the startup has helped start with its zero-commission business model.
Robinhood has selected Nasdaq to list its shares, a separate source familiar with the matter told CNN Business. News of the confidential IPO filing was first reported by Bloomberg News.

A Robinhood spokesman declined to comment.

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

Eventually, Robinhood will need to release these numbers so that investors can assess the company’s growth trajectory and key risks. It will be at least a few months before the S-1 filing is made public, one source told CNN Business.

The GameStop saga triggered the cash crisis

Robinhood launched a firestorm in January, when it temporarily banned users from buying GameStop shares and other shares run by an army of traders on Reddit. Robinhood blamed controversial restrictions on a request from its clearing center to raise up to $ 3 billion due to market volatility.

Robinhood was forced to pull its 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 the brand’s loyalty among users.

Robinhood was sued earlier this year by the family of a 20-year-old trader who died by suicide after seeing a $ 730,000 negative balance in his trading account and mistakenly thought it was the amount of money he owed. The tragedy drew attention to the gamified nature of the Robinhood platform and the startup’s customer service deficits.

Hot markets

In normal times, Robinhood’s stumbling blocks could condemn an ​​IPO, raising questions about whether the company is ready for the spotlight. But these are not normal times.

Lower interest rates, combined with rising interest rates from retail investors and optimism about the economic recovery, have triggered a boom in financial markets. US stocks are trading near record highs, valuations are high and market foam signs abound.

Investors are investing money in empty check companies known as SPACs, a trend that has recently been supported by professional athletes and other celebrities. Traditional IPOs are also very hot.

Traditional IPOs listed in the US have so far raised $ 34.9 billion by 2021, nearly five times more than they did in the same period last year, according to Dealogic statistics from March 19. This is the highest for this point in any year since 1995.

A major player hits the brakes on the latest Wall Street fashion

In the last six months, major companies, including Coupang, Bumble, Snowflake, Airbnb and DoorDash, have grown fully on the first day of trading.

The average first-day population for IPOs listed in the US is 44%, the highest since the 2000 dotcom balloon, according to Dealogic.

A key question for investors examining Robinhood’s books will be how its 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 report in late January by JMP Securities.

This is a developing story.

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