Robinhood Markets, Inc, the US-based financial service corporation, is currently planning to release its much anticipated Initial public offering in March. This news arrives just three weeks after the firm ran into financial problems due to regulatory concerns.
To deposit more securities with the Depository Trust & Clearing Corporation (DTCC), the sector's clearinghouse, Robinhood had to reduce spending on its credit lines and collect $3.4 billion. The DTCC needed members to add more cash due to wild fluctuations in stock values, such as video game store GameStop and movie theatre chain AMC Entertainment Holdings Inc.
Headquartered in Menlo Park, California, Robinhood is known for delivering commission-free stock as well as exchange-traded fund transactions through a mobile application. The firm's income comes from three key sources: interest gained on customers' cash holdings, selling customer orders to elevated brokers as well as profit lending. Robinhood has grown exponentially in recent years, from 100,000 users in 2013 to 13 million users now.
According to Bloomberg, Robinhood has held meetings with its underwriters about going forward with the IPO. It's unknown how much money Robinhood plans to raise from the IPO or whether it'll do so through a conventional IPO or a direct listing. When it raised $660 million in previous years, the stock exchange was estimated at $11.7 billion. After retail investors triggered a rise in stocks whacked by hedge funds, the trading platform became famous during the outbreak. With homebound youngsters switching to Robin's trading application to make cash and pass the time, lately sparked outrage after briefly disrupting trading in GameStop and other firms' shares.
With CEO Vladimir Tenev reportedly testifying before the U.S. House Financial Services Committee, the GameStop saga has taken Robinhood to the spotlight. According to Reuters, Robinhood has chosen Goldman Sachs Group to lead preparations for an initial public offering (IPO) that could be worth more than $20 billion.
Robinhood has also had problems with its execution services, which may hinder its ability to attract more seasoned investors. While most brokers charge a fee for best execution, Robinhood's implementation was even more straightforward: it went out to whichever retail investors had the cheapest and minimum costs. Robinhood was fined $1.25 million by the Financial Industry Regulatory Authority (FINRA) for failing to guide transactions so that its customers got the best rates. Robinhood would not compete with the big players without resolving these problems and gain market share among professional clients. Robinhood, on the other hand, remains a firm favorite among millennial shareholders.