Leading US stock trading app Robinhood has filed for what is expected to be one of the largest public offerings on the US market this year. The app’s popular freemium model saw a surge in new accounts during the recent pandemic as younger investors took to online trading. In January the platform saw an unprecedented increase in new accounts with a staggering 600,000 new users added in a single day, six times the average number of new accounts the month before.
This sudden activity was largely fueled by social media and in particular the short squeeze created by Wallstreetbets on Reddit, costing a prominent hedge fund billions of dollars. This has resulted in scrutiny from politicians and regulators leading to a request from the industry’s clearinghouse.
Robinhood was expected to launch in the UK and had even opened an office in London, before being forced to halt plans in the wake of increasing US pressure. However, their zero commission trading can be found on other UK trading platforms including Trading 212, eToro and Freetrade although Trading 212 have now been forced to suspend the opening of new accounts following unprecedented demand.
The initial public offering has been submitted to the Securities and Exchange Commission as a confidential submission for the SEC’s review. Robinhood have selected Nasdaq for its listing and Trading Platform IG is now offering investors the opportunity to trade pre-IPO on its exclusive grey market, enabling traders to obtain exposure to Robinhood before it officially lists on the stock exchange. This provides the means to trade on the estimated market valuation of a company, a risky but often profitable manoeuvre.
The estimated valuation for Robinhood currently stands at around $11.7 billion and whilst they have experienced a period of rapid growth, the decision to reduce share trading commissions has slowed Robinhood’s growth which in turn could prevent share price growth over time.