The Robinhood IPO will put individual investors on the ground floor while a new filing revealed soaring growth in the last year as Reddit traders drove up meme stocks like GameStop (GME) and AMC Entertainment (AMC).
In an S-1 filing with the Securities and Exchange Commission Thursday, Robinhood disclosed it had 18 million in March, up from 7.2 million a year ago. Monthly active users total about 17.7 million. And assets under management shot up to $80 billion from $19.2 billion.
The company lost $1.4 billion in Q1, though revenue surged 309% to $522 million.
The Robinhood IPO prospectus added the company plans to trade under the symbol “HOOD” on the Nasdaq.
The online broker plans to set aside up to 35% of shares for individual investors, confirmed an earlier report in the Wall Street Journal. Investors must first sign up to buy the shares on its new platform that lets users access IPOs before they start trading.
Robinhood rivals SoFi Technologies (SOFI) and Public Holdings are also launching platforms that offer individuals access to IPO shares.
Large investment banks mostly get first crack at buying IPO shares. And the percentage of shares reserved for individual investors is typically far below 10%, with many going to big banks’ wealthy clients.
Robinhood, whose commission-free stock-trading app is popular among younger retail investors, filed for an IPO on March 23. The company has not released the expected date, price range, share count and total valuation of its IPO.
Some industry watchers say the Robinhood IPO could value the company around $30 billion.
Hot Market For Robinhood IPO
A Robinhood IPO that taps the power of individual investors would come at a busy time for new issues on the market.
For the year, FactSet data show that the volume of IPOs more than doubled from 2019, with 494 IPOs recorded for all of 2020. In aggregate, IPOs raised $174 billion in 2020, a 150% increase over 2019.
And the pace has picked up. U.S. exchanges saw a whopping 365 IPOs in the first quarter, a 67% increase over the fourth quarter of 2020 and a 677% jump compared to a year ago. In all, IPOs raised $128.9 billion in the first quarter, up 84% compared to the fourth quarter and up 790% vs. the first quarter of 2020.
In addition to the Robinhood IPO, the trading app is already giving retail investors access to other companies’ IPOs.
Earlier this week, Robinhood offered users the chance to buy up to 1% of Clear Secure (YOU) IPO shares before it went public on June 30. Language-learning app Duolingo also plans to allocate shares via Robinhood when it goes public.
A few weeks ago medical uniforms maker Figs (FIGS) placed about 1% of its public offering with Robinhood users.
FINRA Fine Ahead Of Robinhood IPO
Meanwhile, on Wednesday the Financial Industrial Regulatory Authority (FINRA) ordered Robinhood to pay about $70 million for “systemic supervisory failures” that harmed investors by giving them “false or misleading information.” The penalty stems from Robinhood’s large-scale system outages and its options trading procedures during the meme-stock craze earlier this year.
“The fine imposed in this matter, the highest ever levied by FINRA, reflects the scope and seriousness of Robinhood’s violations,” Jessica Hopper, head of FINRA’s department of enforcement, said in a statement.
FINRA fined Robinhood $57 million and ordered the startup to pay about $12.6 million in restitution, plus interest, to thousands of customers.
Robinhood neither admitted to nor denied the charges. In a statement, Robinhood said it has heavily invested in improving the platform’s stability, customer support and legal teams.
Robinhood is popular among retail investors who burst on the stock market scene earlier this year in a short-squeeze frenzy that pushed up the value of stocks like GameStop, AMC Entertainment and Bed Bath & Beyond (BBBY).
AMC hit an all-time high 72.62 on June 2. It now trades near 54. AMC stock slipped 4.5% Thursday afternoon. And BBBY stock, which notched a 52-week high of 53.90 on Jan. 27, fell 1.6% early before reversing to the upside.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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