The company behind share trading app Robinhood could be valued at up to $35 billion through its initial public offering, according to a regulatory filing.
Robinhood Markets, the Silicon Valley-based company behind the controversial app that is popular with younger investors, set a price range of $38 to $42 per share for its listing on Nasdaq Dubai. It is planning to list 55 million shares, raising up to $2.3bn in proceeds.
"We're proud to serve this next generation of investors and it's painful to see them continually lambasted in the news reports. Anecdotes of people winning (and losing) large amounts of money garner more attention than the pedestrian truths – the majority of our customers like to buy and hold," co-founders Vlad Tenev and Baiju Bhatt said in an introductory letter to the company's prospectus.
Robinhood offers users free share trading as well as the ability to buy and sell more exotic instruments such as options and cryptocurrencies.
In an updated prospectus filing on Monday, the company said it had 22.5 million funded accounts as of June 30, up from 18 million at the end of March and a 130 per cent increase on the same period last year. It expects revenue to increase by about 129 per cent year-on-year to between $546 million and $$574m and the amount of assets under its custody to grow to $102bn – more than trebling from $33bn a year earlier.
The $35bn valuation it could achieve at the top end of the IPO range is a sizeable uplift from the $11.7bn it attracted in September last year through a late stage (Series G) funding round, when it raised $660m from investors including venture capital firms Andreessen Horowitz, Sequoia Capital and D1 Capital Partners.
Robinhood has attracted criticism for the 'gamification' of investing and for not doing enough to make clear to users some of the risks involved in the trades they embark upon. It is being sued by the family of a 20-year-old share trader in the US who committed suicide after mistakenly believing he had run up huge losses. Robinhood also generates most of its revenue through payment for order flow, with market makers paying the company to route its customers' trades through them – a practice banned in other markets such as Canada and the UK.
The prospectus highlighted a number of risks, including a slowdown in the growth of new users over the next three months. The June quarter had witnessed an "exceptionally strong interest in trading, particularly in cryptocurrencies".
It also warned that new regulations could disrupt its business model, including a potential ban on payment for order flow.
The company has already faced action from regulators, making a $65m payment to the US Securities and Exchange Commission in December to settle a case brought against it for "repeated misstatements" that failed to declare to its customers that it was being paid to route their orders through certain brokers.
"We expect to continue to be subject to such proceedings in the future, which could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business," the prospectus said.
Robinhood intends to use net proceeds of about $2bn from the listing to repay loans, for working capital and "general corporate purposes" including hiring new staff and expanding its customer support operations.
"Robinhood is a controversial company," Martin Boujol, a strategy assistant to the chief investment officer at Swiss digital bank Flowbank, said in a note to clients earlier this month. "On one hand, it empowered millions of retail investors, democratised investing and can show rather solid financial fundamentals. On the other, it is not certain that the company will be able to maintain growth and new SEC regulations could heavily compromise [its] commission-free offering."