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Robinhood IPO priced at $38 pegging valuation at $32 billion

Robinhood’s revenue soared 245 percent last year to $959 million. It then hit $522 million in the first three months of 2021 alone, more than quadrupling from the year-ago level.

July 29, 2021 / 11:03 AM IST
The popular online brokerage is taking the unusual step of allowing users of its trading app to buy up to a third of its IPO shares before they begin trading on the Nasdaq Thursday under the HOOD ticker symbol.

The popular online brokerage is taking the unusual step of allowing users of its trading app to buy up to a third of its IPO shares before they begin trading on the Nasdaq Thursday under the HOOD ticker symbol.

Brokerage trading app Robinhood is all set for its big opening on the Wall Street targeting a $2 billion raise. It priced its 60.5 million shares of its stock at $38 per share on the lower end of the initial public offering (IPO) of its expected range of $38 to $42 per share, indicating tepid investor interest.

The popular online brokerage is taking the unusual step of allowing users of its trading app to buy up to a third of its IPO shares before they begin trading on the Nasdaq Thursday under the HOOD ticker symbol. Typically, only institutional investors and company insiders can buy shares in companies before they go public.

Robinhood’s revenue soared 245 percent to $959 million in 2020. It then hit $522 million in the first three months of 2021 alone, more than quadrupling from the year-ago level.

Papers showed the company had around $12 billion in cryptocurrency assets till March 31, 2021. This is 23 times higher than its crypto assets in 2020. Notably, more than 9.5 million customers traded close to $88 billion of cryptocurrency on Robinhood's platform during the same period.

Robinhood doesn’t charge trading commissions or require customers to carry big balances, one reason why it's so popular. It makes the bulk of its money 81 percent of revenue in the first quarter by funneling investors' orders to big trading firms, such as Citadel Securities, which take the other side of the trade. They also give a payment to Robinhood.

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The practice, called payment for order flow, has drawn criticism from lawmakers and regulators. The head of the Securities and Exchange Commission has questioned whether it prevents investors from getting the best price possible for their trades and whether it impels brokerages to encourage customers to trade more frequently than they should.

But legal experts say tighter regulation may be difficult to bring about. Brokerages need to make money somehow, and if Robinhood can’t get it from payment for order flow, it could go back to charging trading commissions, said Joshua Mitts, a law professor at Columbia University. That could make politicians even less popular than they already are.

[Inputs from AP]
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first published: Jul 29, 2021 11:03 am
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