Robinhood Markets, the trading platform behind the boom-and-bust swing in GameStop’s shares, plans to file confidentially for an initial public offering as soon as March, according to people familiar with the matter.
The company has held talks in the past week with underwriters about moving forward with a filing within weeks, said the people, who asked to not be identified because the matter isn’t public. No final decision has been made and the timing could change, the people said.
Robinhood, which was valued at $11.7 billion in a funding round last year, raised financing this year that will convert to equity in an IPO. A first tranche will convert at a $30bn valuation or a 30 per cent discount to the IPO, whichever is lower, with the second at the lower of the 30 per cent IPO discount or a $33bn valuation, Bloomberg reported.
A representative for Robinhood, based in Menlo Park, California, declined to comment.
Robinhood exploded in popularity during the pandemic as homebound young people turned to its trading app to make money and pass the time. The company, which has been targeting a 2021 IPO since at least last year, encountered a cash crunch three weeks ago and since then has faced regulatory inquiries, including a hearing convened by the House Financial Services Committee.
Robinhood had to draw down its credit lines and raise $3.4bn from its backers to post more collateral with the Depository Trust & Clearing Corporation, the industry’s clearinghouse. The DTCC wanted members to post more cash to ensure they could clear trades, given wild swings in stocks including video game retailer GameStop and movie theater chain AMC Entertainment Holdings.
Robinhood is also facing political and customer backlash because it temporarily curbed trading in GameStop and other stocks.
Robinhood Financial said in a filing on Friday that it’s in talks with the Financial Industry Regulatory Authority to settle an investigation regarding March 2020 app outages and options trading. The US Securities and Exchange Commission and FINRA are reviewing how Robinhood displays cash and buying power to customers and its options trading approval processes, according to the filing.
The company has been considering selling some of its shares in its IPO directly to its own users, Bloomberg News reported. Such a move would be striking because retail investors usually don’t get to buy into new listings at the offering price. Instead, they typically have to invest on the first day of trading in a rush that can drive up the stock price.