Robinhood IPO Expected in Q2 - Barron's

An IPO would let Robinhood raise fresh capital and access financing.
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Robinhood Markets, the trading app that has come under scrutiny for GameStop trading, is moving forward with plans to go public, four bankers and venture capitalists said.

The startup’s IPO plans are on track and an offering is expected in the next few months, likely in the second quarter, three of the people said.

“The [Robinhood] IPO is full steam ahead,” one of the bankers said. Goldman Sachs (ticker: GS) is advising on the offering, one of the people said.

An IPO would let Robinhood raise fresh capital while allowing the company, once public, to access financing, people said. Robinhood was pushed to raise $3.4 billion in the past week after a buying frenzy forced the trading platform to boost the money it deposits with the clearinghouses that process its trades.

Executives for Robinhood and Goldman declined to comment.

Founded in 2013, Robinhood offers commission-free trading in stocks, ETFs, options, and cryptocurrencies as well as margin, PitchBook said. The company sends customer orders to market makers like Citadel Securities, Virtu Americas, and G1X Execution services. It had 1,281 employees in 2020.

On Monday, Robinhood said it added another $2.4 billion in a round led by Ribbit Capital. That funding came after the startup raised $1 billion from current investors last week.

The Menlo Park, California company has come under pressure after Robinhood limited trading of GameStop (ticker: GME) and other stocks. The move caused outrage among its customers, investors and on Wall Street. Even Rep. Alexandria Ocasio-Cortez (D-N.Y.), and other legislators, wrote on Twitter that Congress should look deeper into Robinhood’s actions.

Robinhood attempted to explain its actions, claiming that clearinghouse requirements prompted the company to limit trading in certain stocks, according to a Jan. 29 blog post. The company said clearinghouse-mandated deposit requirements spiked to 10 times the normal number and Robinhood “had to take steps to limit buying in those volatile securities to ensure we could comfortably meet our requirements.”

The fury over Robinhood’s tactics didn’t dampen its popularity. The app was downloaded more than one million times last week. This caused one hedge fund executive to say Robinhood’s IPO will still likely be a winner. “If they are growing users and have a plan to address the PFOF issues with Citadel, I think they can still go public with some Twitter haters out there,” the exec said.

PFOF refers to payment for order flows. Trades on Robinhood are sold to market makers, or large firms like Citadel.

An IPO would provide an exit for Robinhood’s many investors. They include D1 Capital Partners, Sequoia Capital, NEA, 9 Yards Capital, and Unusual Ventures. Some of Robinhood’s earliest backers, like Index Ventures, Draper Associates and Andreessen Horowitz, took part in the company’s $3 million seed round in 2013.

Index Ventures and Draper declined to comment. Ribbit, Sequoia, NEA, 9 Yards, and Andreessen didn’t return messages for comment.

Write to Luisa Beltran at luisa.beltran@dowjones.com

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