Robinhood is the owner of a trading app that has become the preferred destination for retail investors to speculate on this year’s “meme” stock trading frenzy, raising US$2.1 billion (approximately Rs 15,600 crore) in its IPO .

The company is seeking to capitalize on individual investors’ fascination with stocks such as cryptocurrencies and GameStop, which have experienced dramatic volatility after becoming speculative on social media sites such as Reddit. Robinhood’s monthly active users surged from 11.7 million at the end of December to 21.3 million at the end of June.

The IPO valued Robinhood at 31.8 billion U.S. dollars (approximately Rs. 23605 billion) in terms of revenue, which makes it higher than many traditional competitors such as Charles Schwab. However, the pricing of this issuance is within the company’s designated range. bottom.

Some investors took a wait-and-see attitude, citing concerns about the valuation bubble, the risk of regulators cracking down on Robinhood’s business, and even anger at the trading restrictions imposed by the company when the meme stock trading frenzy broke out at the end of January.

Robinhood stated that it sold 55 million shares in the IPO at a price of US$38 (approximately Rs 2,820) per share, which is the price range of its US$38 (approximately Rs 2,820) to US$42 (approximately Rs 3,110). Low end. This makes it one of the most valuable U.S. companies that have gone public so far this year, because the newly listed market is hot.

Robinhood said it will reserve 20% to 35% of its users, which is an unusual move.

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Robinhood’s platform allows users to conduct unlimited commission-free transactions on stocks, exchange-traded funds, options and cryptocurrencies. Its simple interface made it popular with young investors who trade at home during the COVID-19 pandemic.

Earlier this year, Robinhood restricted the trading of some popular stocks after the clearing house’s deposit requirements increased by 10 times, which angered some investors and US lawmakers. It has been the center of many regulatory investigations.

The company revealed this week that it has received inquiries from U.S. regulators investigating whether its employees had traded GameStop and AMC Entertainment stocks before implementing trading restrictions at the end of January.

In June, Robinhood agreed to pay nearly US$70 million (approximately 5.2 billion rupees) to resolve Wall Street’s own regulatory agency, the Financial Industry Regulatory Authority,’s investigation of “systematic” failures, including system outages and providing “false or misleading” information. And weak option trading control.

The brokerage has also been criticized for relying on “order flow payments” for most of its revenue, according to which it collects fees from market makers to route transactions to them, and does not charge users personal transaction fees.

Critics argue that this approach, adopted by many other brokers, creates a conflict of interest on the grounds that it encourages brokers to send orders to people who pay higher fees. Robinhood argues that it arranges transactions based on the user’s cheapest price, and that it will be more expensive to charge commissions. The US Securities and Exchange Commission is reviewing this practice.

Robinhood was founded in 2013 by roommates Vlad Tenev and Baiju Bhatt of Stanford University. These documents show that after the issuance, they will have a majority of voting rights, Bhatt owns about 39% of the voting rights of the outstanding shares, and Tenev will hold about 26.2% of the voting rights.

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The company’s stock is scheduled to start trading on NASDAQ on Thursday under the ticker symbol “HOOD”

Goldman Sachs and JPMorgan Chase are the lead underwriters of Robinhood’s IPO.

© Thomson Reuters 2021