Robinhood files for IPO amid GameStop controversy

Robinhood has filed paperwork with regulators for a public offering, the company on Tuesday said, setting up what is expected to be one of this year’s largest and most contentious listings on US markets.

The stock-trading app confidentially submitted the filings for an initial public offering to the Securities and Exchange Commission, according to the statement. Confidential submissions allow companies to submit materials for the SEC’s review before filing a public prospectus.

The company’s listing could come as soon as the next few months. Robinhood chose Nasdaq for its listing, said a person briefed on the matter.

Robinhood’s zero-commission model and easy interface have made it a favourite among retail traders who have piled into the stock market while stuck at home during the pandemic.

The company stirred controversy with its decision in January to restrict trading in “meme stocks” such as GameStop. The action came after shares in the companies had soared in price, causing a short squeeze that cost hedge funds billions of dollars.

Vlad Tenev, Robinhood’s chief executive, was summoned to Capitol Hill and grilled by US lawmakers who expressed concerns that the company was encouraging the “gamification” of US equity trading.

Robinhood also revealed in regulatory filings in February that the SEC, several state regulatory authorities, and the Financial Industry Regulatory Authority were investigating the company over its options trading process and several outages it had in March 2020.

Robinhood, in the February filing, said it was in talks with Finra, Wall Street’s self-regulatory arm, about a potential resolution to the investigation, and that it expected to pay a fine as part of any settlement.

Robinhood raised $3.4bn in convertible debt from its existing investors after the surge of trading in GameStop and other popular stocks strained its finances.

Investors in the most senior portion of the debt would be able to convert their notes into equity at a 30 per cent discount to any offering price, or an implied valuation of $30bn, whichever is lower.