Robinhood targets $35bn valuation in IPO

San Francisco — Robinhood Markets is seeking a valuation of $35bn in its initial public offering (IPO), just short of the highest analyst projections, as the free trading app advances towards a debut likely to draw in buyers from its own novice investor base.

The company at the centre of this year’s meme stock frenzy will market 55-million shares for $38-$42 each, according to a filing on Monday with the US Securities and Exchange Commission. Bloomberg Intelligence in March estimated that Robinhood could be valued in a range of $13bn-$40bn.

Robinhood aims to raise more than $2bn in its public debut, planned for later this summer. With the price range set, it will now proceed with its IPO roadshow and will start meeting with investors this week. Its valuation could still change depending on demand from investors.

As a publicly traded brokerage, Robinhood will join the ranks of Coinbase Global, a cryptocurrency trading platform that debuted this year and is worth almost $47bn, and industry heavyweight Charles Schwab, which bought competitor TD Ameritrade in 2020 and has a market value of about $130bn.

With plans to raise more than $2.2bn, Robinhood’s IPO would be the fifth-biggest on a US exchange in 2021. This year has already set a record with 648 companies raising a total of about $218bn, according to data compiled by Bloomberg.

Robinhood caught on during the coronavirus pandemic as homebound young people turned to online trading to pass the time and make money. Its monthly active users have more than doubled in the past year, with 17.7-million in the first quarter, up from 8.6-million in the same period in 2020.

The Menlo Park, California-based company has said it will reserve 20% to 35% of its Class A shares for its customers.

Robinhood’s increased popularity has led to scrutiny from politicians and regulators, who are focused on the so-called gamification of trading and its role in the meme-stock phenomenon. At the height of the volatile in late January with frenzy over stocks such as GameStop, the company had to raise billions of dollars from its backers.

In June the Financial Industry Regulatory Authority (Finra) imposed an almost $70m fine on Robinhood, a record for the watchdog. Finra alleged Robinhood misled its customers about margin trading and lapsed in its oversight of technology and approvals for options traders. Robinhood neither admitted nor denied the claims.

Robinhood announced in March that it had filed confidentially to go public. It disclosed its financials for the first time in its July 1 public filing, which showed the company generated net income of $7.45m on net revenue of $959m in 2020, compared with a loss of $107m on $278m the previous year.

Robinhood’s top shareholders are venture firms DST Global, Index Ventures, New Enterprise Associates and Ribbit Capital. Each group owns more than 5% of its stock leading into the offering.

Goldman Sachs Group and JPMorgan Chase are leading Robinhood’s offering and its shares are expected to trade on the Nasdaq.

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