Robinhood confidentially files for IPO

Robinhood Markets, Inc. has announced it has confidentially submitted a draft registration statement on Form S-1 with the Securities and Exchange Commission.

The draft statement relates to the proposed initial public offering of its common stock, with the number of shares to be offered and the price range for the proposed offering still to be determined.

The IPO is expected to take place after the SEC completes its review process, subject to market and other conditions, the US-based neo broker stated.

The year 2021 started with a significant PR problem for Robinhood amid the rise of r/WallStreetBets and the social trading frenzy which have fueled a short squeeze in the GameStop stock.

The extreme volatility at the time, in GME and many other stocks touted on Reddit and other social media platforms, have resulted in restrictions to trading in a number of trading services, including Robinhood.

The US-based neo broker led by Vlad Tenev bore most of the shame as the venue was idolized for having the democratization of capital markets as its sole mission.

The issues Robinhood and many other trading firms faced were due to the two-day trade settlement period in a time of extreme volatility which led clearinghouse deposit requirements to skyrocket overnight. In this scenario, investors were kept waiting for trades to clear, while clearing brokers are kept from their deposits until the settlement is finalized two days after the trade.

Instead of mitigating risk, these requirements can induce quite the opposite effect, but with new risks. The whole post-trade controversy has led many within the industry to call for real-time settlement. Robinhood’s CEO Vlad Tenev and others are calling the trading industry, Congress, regulators, and other stakeholders “to come together to deploy our intellectual capital and engineering resources to move to real-time settlement of U.S. equities”.

“Accomplishing this won’t be without its well-documented challenges, but it is the right thing to do and Robinhood is eager to drive this critical effort on behalf of all investors. Technology is the answer, not the oft-cited impediment. We believe it is important for all relevant stakeholders to convene in the near term to discuss the urgency and necessity of this issue”, Mr. Tenev added.

Despite the bad publicity, Robinhood has found huge growth in new customer accounts since the pandemic and during the social trading frenzy. Robinhood is thus moving forward with the IPO plans.