NEW YORK (REUTERS) – Robinhood Markets, the owner of the trading app which emerged as the go-to destination for retail investors speculating on this year’s “meme” stock trading frenzy, raised US$2.1 billion (S$2.85 billion) in its initial public offering (IPO) on Wednesday (July 28).
The company is seeking to capitalise on individual investors’ fascination with cryptocurrencies and stocks such as GameStop, which have seen wild swings after becoming the subject of trading speculation on social media sites such as Reddit. Its monthly active users surged from 11.7 million at the end of December to 21.3 million as of the end of June.
Robinhood sold 55 million shares in its IPO at US$38 apiece, the bottom of its targeted price range of US$38 to US$42, a person familiar with the matter said on Wednesday. In an unusual move, Robinhood had said it would reserve between 20 per cent and 35 per cent of its shares for its users.
The IPO values Robinhood at US$31.8 billion. It makes it one of the most valuable US companies to have gone public year-to-date, amid a red-hot market for new listings.
The source requested not to be identified ahead of an official announcement. Robinhood did not immediately respond to a request for comment.
Robinhood’s platform allows users to make unlimited commission-free trades 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 enraged some investors and US lawmakers earlier this year when it restricted trading in some popular stocks following a ten-fold rise in deposit requirements at its clearinghouse. It has been at the center of many regulatory probes.
The company disclosed this week that it has received inquiries from US regulators looking into whether its employees traded GameStop and AMC Entertainment Holdings before the trading curbs were placed at the end of January.
In June, the company agreed to pay nearly US$70 million to settle an investigation by the Financial Industry Regulatory Authority for “systemic” failures, including systems outages, providing “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 revenue, under which it receives fees from market makers for routing trades to them and does not charge users for individual trades.
Critics argue the practice, which is used by many other brokers, creates a conflict of interest, on the grounds that it incentivizes brokers to send orders to whoever pays the higher fees. Robinhood contends that it routes trades based on what is cheapest for its users, and that charging a commission would be more expensive. The US Securities and Exchange Commission is examining the practice.
Robinhood was founded in 2013 by Stanford University roommates Vlad Tenev and Baiju Bhatt. They will hold a majority of the voting power after the offering, these filings showed, with Mr Bhatt having around 39 per cent of the voting power of outstanding stock while Mr Tenev will hold about 26.2 per cent.
The company’s shares are scheduled to start trading on Nasdaq on Thursday under the ticker “HOOD”