Love it or I hate it, Robinhood changed the retail stock market.
The trading app was launched in 2015 and offered its users a mobile platform to invest in the stock market. It became famous for its commission-free trading.
Its stated mission is to “democratize finances for all”.
Robinhood’s business model generates revenue by selling its user orders to market makers. This is known as “paying for the order flow”. The industry generated additional revenue from the process for years, but Robinhood made it a major source of income.
As the app grew in popularity, the rest of the industry caught up. Since 2019, E-Trade, TD Ameritrade and Interactive Brokers Group, Inc. (NASDAQ: IBKR) have also been offering commission-free trading.
However, Robinhood users have not yet been able to invest in Robinhood, the company. This fact was confirmed by Robinhood CEO Vlad Tenev during a congressional hearing when questioned by Rep. Patrick McHenry (R-NC).
Despite its popularity with younger investors, things didn’t go smoothly for Robinhood.
In 2020, the company agreed to pay a $ 65 million fine to settle the SEC’s allegations of filling its customers’ orders at lower prices.
In January 2021, Robinhood made the controversial decision to purchase GameStop Corp. (NYSE: GME) and other stocks during a time of extreme volatility. The move brought intense criticism and a hearing in Congress.
Despite the controversy and Twitter’s #deleterobinhood campaign, the platform saw a record number of app downloads and new accounts opened during and immediately after the volatility, according to Bloomberg reports.
The Robinhood story is far from over – and it seems retail investors are finally getting the chance to invest in this disruptive company.
A blog post on his website states: “Robinhood Markets, Inc. has submitted a confidential draft of a registration statement … [for its] Proposed IPO … The number of shares to be offered and the price range for the proposed offer have not yet been determined. “
According to a CNBC report, the company totaled $ 12 billion in a funding round in 2020. During January’s volatility, Robinhood raised $ 3.4 billion from investors to avoid a potential liquidity problem. The move could have affected the company’s valuation.
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