Tech

Robin Hood’s Guinea Pig Scheduled for Public Offering: In itself

San Francisco — When Vladimir Tenev And created by Baiju Bhatt Stock Trading App Robinhood In 2013, entrepreneurs declared that it was their mission to democratize Wall Street and give everyone access to finance. Now that they are preparing to open the company to the public, they are taking that spirit to a new level.

How Tenev and Bart have been arguing for a long time Initial Public Offering of Robin Hood According to three people close to the company, it is more open than any other product to date. This week, two founders announced details. Robin Hood will sell one-third of the products it offers directly to its customers through the app, or $ 770 million in shares. The company added that anyone can attend a special live stream of investor presentations this Saturday.

This move is extremely rare and overturns the traditional IPO process. Initially, no company has offered so many stocks to everyday investors. Companies typically reserve 1-2 percent of their stock with their customers. In addition, investor presentations are usually held in a closed room with the Wall Street company, which has the longest access to public offerings.

But Tenev and Bart have plans to change the way they do IPOs, at least since 2019, people familiar with companies that aren’t allowed to speak publicly said. Robin Hood is also capable of helping banks sell pre-IPO stocks (usually reserved for professionally managed funds) to thousands of everyday investors with Robin Hood’s app. For this reason, we chose to lead the offer of Goldman Sachs.

“For many, we recognize that this will be the first IPO you have had the opportunity to participate in,” Tenev, 34, and Bat, 36, wrote to Robin Hood. Prospectus provision.. They added that they wanted to put their clients on an “equal side” with large institutional investors.

However, the risk of opening an IPO is significant. Robin Hood faces the technical challenge of ensuring that pre-IPO equity orders are processed smoothly and accurately with a large number of investors. Large professional funds tend to hold stocks to buy at IPOs, but everyday investors rarely stop dropping Robinhood stocks right away.

Robin Hood also allows employees to sell up to 15% of their shares shortly after listing, rather than having employees wait the traditional six months. It can be added to volatile trading.

The company’s app contains standard industry warnings about “flipping” shares within 30 days, saying it could prevent flippers from buying into a future IPO.

If the offer is successful, it will validate the mission of Mr. Tenev and Mr. Bat and change the way potentially hot companies publish. It also includes technical outages, user protests, proceedings, Regulatory scrutiny and fines..

“The company is at great risk,” said RA Farokunia, a professor of business economics at Columbia Business School. “If it works, it will be a great win. If it doesn’t, it will be a black mark.”

Robin Hood refused to make executives available for interviews because of the rules of the pre-listing silence period.After first setting the price of the stock For $ 38 to $ 42 respectivelyRobin Hood has a valuation of approximately $ 35 billion and will set a final price next Wednesday and begin trading the next day.

Companies and their advisors were cautious about selling most of their IPO shares to retail investors. According to bankers, technical issues could lead to regulatory scrutiny and investor proceedings.

In 2006, telephone service provider Vonge tried to sell its shares to its customers at an IPO, but due to technical issues, buyers were uncertain whether the deal was closed until a few days after the shares plunged. The customer sued Vonage and the regulator fined the bank that provided it.

BATS Global Markets, a stock exchange, tried to publish on its own exchange in 2012, but “Technical problemOn the day of its offer, I had to pull the deal. Facebook’s 2012 debut is “FlopAfter a similar glitch in the new trading system.

Still, Tenev and Bert saw a more open IPO at the heart of Robin Hood’s spirit.Their app attracted millions of new investors World of day trading, And the company repeatedly pushed the boundaries of new products, often reaching hot water with regulators.

This year, Robin Hood announced IPO access. This is a product that allows publicly traded companies to sell their pre-IPO shares directly to their clients. That way, people can make money with the stock price “pops” that often occur on the first day of a company’s trading.

One company Robin Hood approached this year about allocating a portion of its initial public offering to everyday investors was medical scrubbing company Figus, said its CEO Heather Hasson. In the end, figs offered 1 percent of what they offered to retail investors to “empower” healthcare providers buying apparel, Hasson said.

“Our community is our brand and our brand is our community,” she said.

But even with such a small allocation, banks like Goldman Sachs were worried about potential technical problems and hurt individual investors, said someone with the knowledge to offer. .. This was the first time Robin Hood’s app hosted such a deal. Fig’s share price has risen nearly 30% since its launch in May.

Robin Hood’s service is unlikely to be easily emulated because it is unique in size and perception among retail investors and has a business that facilitates retail trading, according to law firm Simpson Thacher & Bartlett. Josh Bonnie, who helps lead the capital markets, said.

“I think they’re in a different position than most companies pursuing an IPO,” he said.

Robin Hood’s debut has shown that its customers are willing to band together on social media to fight perceived enemies, which could add an unpredictable layer. The company alienated some of them when traders gathered on the Reddit platform stopped trading during the January “meme stock” rally that sent shares of certain companies like GameStop on a roller coaster. did.

Investors who lost money during the suspension were furious — including Muhammad Hamza, a recent college graduate of Queens. He joined Robin Hood in November and saw investment in Penny and Meme stocks swell and plummeted by about half during the January outage. He said he felt betrayed.

“I don’t know how to get over it,” said 22-year-old Hamza. He is currently using a competing service, WeBull, and has no plans to acquire it for Robin Hood’s IPO. Instead, he said he was considering shorting Robin Hood’s stock or betting on lower prices after listing.

He said his friends in the online community are planning a similar move, but some can’t leave the easy-to-use app. Despite the backlash, Robin Hood added 5 million users last year, quadrupling quarterly revenue.

“Many people are anti-Robin Hood, but they still use Robin Hood,” Hamza said.

Robin Hood’s Guinea Pig Scheduled for Public Offering: In itself

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