Trading app Robinhood said to be planning Nasdaq IPO

The stock trading platform plans to file for a listing with the US Securities and Exchange Commission, reports say

The online stock trading app may list on the Nasdaq this year. Photo: AFP 

Robinhood Markets, the trading platform behind the boom-and-bust swing in GameStop’s shares, plans to list its shares on Nasdaq in New York this year, according to media reports.

The company has not officially filed for the listing as yet. However, Robinhood plans to confidentially file for an initial public offering with the US Securities and Exchange Commission this month, CNBC and Bloomberg reported, citing unnamed sources

Robinhood surged in popularity during the pandemic due to monetary easing by the US Federal Reserve and other central banks, putting more money into people’s pockets during Covid-19 lockdowns. Homebound young people turned to its trading app to make money.

The company, which has been targeting a 2021 IPO since at least last year, was at the centre of the stock trading frenzy driven by Reddit’s WallStreetBets forum, which drove up the share price of US video-game retailer GameStop and movie theatre chain AMC Entertainment Holdings.

The online broker drew criticism for restricting trading in GameStop shares and other heavily shorted companies, denying investors a chance to book profits. The platform said it limited trading in GameStop to boost its cash buffers and pay for clearing house deposits.

“There will likely be some concern about the platform's trading halt diluting GameStop, but investors will look through this one-off incident in favour of the new wave of retail trading euphoria,” Stephen Innes, chief global market strategist at Axi, said.

“It's a good time for Robinhood to leverage this momentum as I think this will pass when trading in stocks gets more complicated by central bank policy and internal and regulatory oversight to curb toxic flashmob-type trading.”

Robinhood encountered a cash crunch four weeks ago and raised $3.4 billion 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 GameStop and AMC.

The trading app has also faced regulatory inquiries. Robinhood Financial said in a filing that it’s in talks with the Financial Industry Regulatory Authority to settle an investigation regarding March 2020 app outages and options trading.

Goldman Sachs is advising Robinhood on its IPO, according to CNBC. The online broker, which was valued at $11.7bn in a funding round last year, raised financing this year that will convert to equity in a public offering.

The stock trading app added 3 million users in January alone, according to estimates from JMP Securities.

New York-based D1 Partners, Sequoia, Kleiner Perkins and Google’s venture capital arm, GV are some of Robinhood’s biggest venture capital investors.

The online broker also faced a public backlash when Alex Kearns, a 20-year-old college student in the US killed himself in June last year after mistakenly believing he had lost a fortune to Robinhood. Critics then accused the trading app of allowing inexperienced investors to take big risks in complex financial instruments without providing investment guidance or the necessary customer support.