Retail platform Robinhood Markets, Inc. noticed its reputation skyrocket in 2020. The pandemic has introduced a flood of latest customers to the brim with stimulus cash. And the commission-free investing app discovered itself inundated with new listings. Rumors of an preliminary public providing flourished and peaked in 2021.

Twitter, TIC Tac and a slice of easy-to-invest app entrepreneurs introduced many extra new shoppers to Robinhood. Then got here the rise of the similar shares and the race for business wealth was on. This very entertaining week of inventory market chaos began round January 22 and continued into the next week.

A web-based dialogue board on Reddit known as WallStreetBets gathered the plenty to purchase shares in GameStop (NYSE: GME) and some others (AMC Leisure, Palantir, Blackberry). Shares had been put down by quick sellers and the WallStreetBets the crew needed to stand up towards them. Because the hype gained momentum and the costs of those shares rose steadily, speculative retail merchants floundered within the motion. In flip, Robinhood has seen file ranges of latest prospects signing as much as the platform.

A pointy actuality shock

However then issues turned bitter. Because the GameStop share value skyrocketed and worn out hedge funds, Robinhood stopped shopping for the inventory (and some others). However in a controversial approach, it allowed the shares to be offered. This created panic and lots of buyers misplaced their mood, promoting their shares, which brought about the value to drop.

In response, Robinhood acquired an enormous backlash, with requires the platform’s cancellation and the resignation of founder Vlad Tenev.

Whereas the preliminary backlash appeared sure to spell the top of the Robinhood platform, it shortly grew to become obvious that she had the first-comer benefit in each approach. And the controversy did nothing to weaken its model consciousness.

The information was not solely vital in Wall Avenue and within the funding communities. Celebrities floundered within the debate, adopted by politicians and the mainstream media. All of this free protection has given Robinhood a brand new stage of name consciousness and a surge of latest potential prospects.

Greg Martin, Managing Director and Co-Proprietor of Rainmaker Securities, stated:

“From a model recognition standpoint, who would not know who Robinhood is? Regardless of the constructive and unfavorable press, everybody on the earth is aware of who Robinhood is. They could not get higher free publicity. “

In accordance with estimates by JMP Securities, Robinhood might have gained 3 million customers final month alone. Which appears doable provided that Vlad Tenev, co-founder and CEO of Robinhood Markets, Inc. tweeted that in January and February Robinhood welcomed 6 million new shoppers to its crypto department. That is greater than all of its crypto listings for all of 2020.

Is a Robinhood IPO imminent?

In accordance with sources, and reported by Bloomberg, Robinhood administration had discussions final week with underwriters to maneuver ahead with a possible deposit.in a couple of weeks, “. That is nonetheless within the rumor stage and no closing or closing determination has been confirmed, together with the timing of the IPO. However rumor has it that the IPO will happen this month.

In an funding spherical final yr, the corporate was valued at round $ 11.7 billion.

Nevertheless, it has since managed to safe further funding this yr that’s anticipated to transform to shares when it goes public. A primary installment is anticipated to transform to a price of round $ 30 billion or a 30% discount from the general public providing (whichever is decrease). With the second payout on the decrease of the IPO lower by 30% or a valuation of $ 33 billion, Bloomberg confirmed.

Too huge to fail?

Whereas the corporate should face the realities of operating such a big company on the behest of the general public, whereas appeasing these highly effective Wall Avenue supporters, it appears effectively positioned to take action.

With its customers rising and valuation on the rise, the corporate seems in some ways to be in a stronger place than a yr in the past. In response to the halt in operations, the federal government known as Tenev to testify earlier than the U.S. Home of Representatives Monetary Providers Committee. That is a part of his assertion:

“Robinhood has opened the markets to thousands and thousands of particular person buyers. I need to be clear from the outset: Any declare that Robinhood acted to help hedge funds or different particular pursuits to the detriment of our shoppers is totally bogus and market-distorting rhetoric. Our shoppers are our high precedence, particularly the thousands and thousands of small buyers who use our platform day by day to take a position for his or her future. “

The billionaire Bulgarian-American entrepreneur went on to say:

“We have now since taken steps to lift an extra $ 3.4 billion in capital to permit our shoppers to renew regular buying and selling on the Robinhood platform, together with buying and selling within the shares we restricted on January 28. . “

Pals in excessive locations

The unprecedented surge in enterprise exercise brought on by the GameStop race led Robinhood to just about run out of credit score. Elevating the extra $ 3.4 billion in such a short while was needed and spectacular. He exhibits confidence in his platforms and his buddies in excessive locations. This allowed Robinhood to deposit the mandatory collateral with the Depository Belief & Clearing Corp., the business’s clearinghouse.

Apparently, demand for Robinhood shares within the non-public markets is growing. And to appease his loyal prospects, he would think about promoting a few of his shares in his IPO on to his personal customers. It may very well be a extremely spectacular publicity stunt that might go a good distance in rebuilding confidence. Beneath normal circumstances, retail buyers shouldn’t have the chance to buy new listings till they’ve launched their IPO. Over the previous yr, many shares have been launched at a severely inflated value. Whereas this doesn’t at all times end in losses, it does include appreciable danger.

As GameStop shares and different meme shares proceed to expertise volatility in inventory costs and inexplicable value spikes, Robinhood might want to hold its prospects comfortable. However to date, it has been confirmed that even unhealthy publicity could be good.