Robinhood aims for the bullseye in blockbuster IPO

Robinhood Markets Inc is set to make its debut on the Nasdaq later this week in one of 2021’s most hotly anticipated initial public offerings (IPOs). The stock trading platform is expected to price its IPO shares at between $38 and $42, the company said in its filing document, with a valuation of US$35bn at the top of the range. READ: Robinhood's crypto division expects US$30mln fine from New York regulator Some 55mln shares are to be offered in the IPO, with founders Vlad Tenev and Baiju Bhatt and its CFO selling 2.63mln of these. Following the IPO, Tenev will hold around 26% of the voting shares and Bhatt 39%. The platform, which allows retail investors to trade stocks, crypto and options commission-free through its website and app, boomed in popularity earlier this year as the explosion in crypto markets and the buying frenzy around stocks such as GameStop Corp (NYSE:GME) and AMC Entertainment Holdings (NYSE:AMC) Inc sent users flooding onto the platform, with its user base adding 6mln accounts in the first two months of 2021 alone. However, while Robinhood has seen its business grow rapidly and secure the backing of multiple institutional investors, some analysts are warning that the group still faces challenges that may put some investors off backing the group when it debuts on public markets. “While Robinhood has expanded rapidly over the last year, it hasn’t come without some public backlash and regulatory scrutiny. Regulators in Massachusetts are looking to ban its citizens from trading on the app, claiming that Robinhood’s gamified investing platform caused its customers to take on too much risk, thereby failing the state’s fiduciary rules”, said Maxim Manturov, head of investment research at Freedom Finance Europe. The company is also facing regulatory blowback from its crypto activities, saying last week in an SEC filing that it expects to pay a fine of US$30mln to the New York State Department of Financial Services (NYDFS) as part of a settlement around alleged violations of the US state’s anti-money laundering rules. Manturov also noted that the company is operating in an “extremely competitive market” with many competitors with deep pockets looking to muscle in. “Charles Schwab recently completed a US$26bn acquisition of TD Ameritrade (NASDAQ:AMTD). Morgan Stanley (NYSE:MS) bought E-Trade. And Chinese-owned investing app WeBull is aiming to duplicate Robinhood’s approach to gamified app investing. Further still, its most direct competitors, eToro is also looking to IPO in 2021”, Manturov said.