Robinhood files draft IPO plan as Wall Street-haters launch Super PAC

Even as a bunch of retail traders join to form a political-bullhorn, controversial stock-trading app Robinhood files a draft registration to go public

Robinhood files draft IPO plan as Wall Street-haters launch Super PAC
Robinhood has filed paperwork with the SEC for what’s sure to be one of the year’s most eagerly awaited initial public offerings. Photo: Robinhood website 

(ATF) Amid the uprising of a Reddit crew that is forming a Super PAC to say they hate Wall Street but not its inventory, Robinhood Markets Inc, that owns the stock-trading app, said on Tuesday that it had filed a draft registration to go public.

The well-financed but recently controversial trading app is a fintech that provides zero-cost trading services to stock traders, It joins the wave of financial technology companies that plan to list on the stock market or that have raised new funding.

While the draft document does not indicate the timing or price of the offering, CNBC had reported earlier that private market investors have valued Robinhood at roughly $12 billion and some have speculated its initial public offering could top $20 billion. It is working with Goldman Sachs on its offering, and is possibly eyeing the Nasdaq for listing.

Robinhood used a process known as filing confidentially that allows it to keep some details under wraps in the early part of going public.

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Robinhood became immensely popular during the pandemic as homebound young people turned to online trading to pass the time and make money.

Its business model made stock trading easier for retail investors by allowing investors to buy fractions of a share in a company, turning stock trading into almost a game.

According to a JMP Securities research note from the end of January, Robinhood was adding 600,000 users in a single day, more than six times the typical number of new users in normal times.

But Robinhood also attracted significant criticism recently after it decided to freeze trades for GameStop on January 28.

STOCK SPIKE

A group of Reddit posters saw an opportunity as shares of the video game retailer spiked after traders on Reddit began frantically buying the company's stock. However, Robinhood made the surprising move to restrict buying GameStop, citing issues with volatile stock and regulatory requirements.

The traders alleged that while they were stripped of their ability to trade on the Robinhood app, the hedge funds and institutional investors on Wall Street continued to trade as normal.

Robinhood users flooded the Google Play Store and Apple's App Store with negative app reviews. There were so many one-star ratings that Google intervened to remove tens of thousands of them.

They also filed a lawsuit filed on Jan. 28 in the Southern District of New York accusing Robinhood of "purposefully, willfully, and knowingly removing the stock 'GME' from its trading platform in the midst of an unprecedented stock rise, depriving retail investors of the ability to invest in the open-market."

HEARING CALL

Consequently users, regulators and lawmakers called for a hearing on Robinhood's actions.

Robinhood CEO Vlad Tenev though said the company had no choice since it had to conform to regulatory capital requirements - of depositing $3 billion with the National Securities Clearing Corporation for allowing the GameStop while the company had just $2bn in capital.

The company however, has also raised $1 billion in emergency capital since then to make sure customers' trades can happen, according to Tenev.

Meanwhile, a bunch of retail traders is coming together to “amplify the voice of the retail investor” as the rise of Reddit-fuelled “meme stocks” like GameStop has rattled big hedge funds and caught the attention of regulators and politicians in Washington.

The new political-action committee registered with the Federal Election Commission under the name “WeLikeTheStock.wtf,” is a Super PAC that wants to convey that they hate Wall Street almost as much as they “like the stock (GameStop),” according Chad Minnis, who filed the paperwork for the Super PAC last month with fellow day trader Christian Freed.

COMMON TRADERS

The founders claim to have already raised hundreds of dollars in small donations in only a matter of weeks, and the objective the committee is offer a light-hearted platform to common traders instead of depending on hedge funds, fat cat bankers, inventory exchanges, and conventional buying and selling platforms on Wall Street.

“What occurred on the finish of January is unacceptable,” said Chad Minnis, referring to frenzied buying and selling initially of the year that noticed skilled merchants betting on GameStop.

Highlighting the growing potency of average investors in a new era of investing, Minnis said that “Wtf expresses our anger and frustration, plus the domain name was cheap.”

But within the humour of their stunt the aim is to give Regular Joe investors the kind of political bullhorn that is usually reserved for the Wall Street giants, he added.

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