Robinhood files confidentially for IPO despite disastrous start to 2021

To make their case, state regulators accused Robinhood of failing to correctly account for fractional shares traded by clients on its platform and mentioned the firm “continues to entice and induce inexperienced customers into risky trading.”

The push by Massachusetts to revoke Robinhood’s license is yet another obstacle facing the company because it prepares to go public after submitting confidentially for an IPO late final month. The massive query is whether or not Robinhood’s authorized and PR troubles will matter to traders in contrast with the startup’s breathtaking progress.

In a weblog put up, Robinhood sharply criticized what it described as “unfounded, politicized allegations and unreasonable demands” from regulators in Massachusetts and warned that revoking its license would block entry for thousands and thousands of shoppers.

Robinhood files confidentially for IPO despite disastrous start to 2021Robinhood files confidentially for IPO despite disastrous start to 2021

“The Massachusetts Securities Division’s attempt to prevent Massachusetts residents from choosing how they invest is elitist and against everything we stand for,” Robinhood mentioned. “We don’t believe our customers are naive as the Massachusetts Securities Division paints them to be.”

Robinhood fired again by submitting a grievance and movement in Massachusetts State Court for a preliminary injunction that may cease the regulatory case towards the firm. Robinhood is arguing that the regulator’s new fiduciary rule “exceeds its authority” beneath each state and federal regulation.

“By trying to block Robinhood, the division is attempting to bring its residents back in time and reinstate the financial barriers that Robinhood was founded to break down,” Robinhood mentioned in the weblog put up.

More than simply confetti

The battle started in December when regulators in Massachusetts filed a 24-page complaint towards Robinhood accusing the firm of violating state regulation and rules by failing to shield clients and safeguard its system. Officials alleged Robinhood lured inexperienced traders to its platform with gaming components corresponding to colourful confetti — a apply that the company recently said it is getting rid of.

The amended grievance filed Thursday says Robinhood has continued a sample of aggressively engaging clients, together with some with “little or no investment experience.” It cites information stories indicating Robinhood has expanded margin lending and sought to persuade clients to deposit their stimulus checks by providing “free cash” for deposits.

Robinhood is trying to go from PR nightmare to IPO. In this market, it might just workRobinhood is trying to go from PR nightmare to IPO. In this market, it might just work

Robinhood’s conduct since the grievance was filed in December “poses a substantial and continued risk to Massachusetts investors,” the grievance mentioned.

Massachusetts regulators mentioned Robinhood has failed to report its fractional share commerce executions for over a 12 months, “demonstrating its inability to follow the most basic requirements” required of broker-dealers.

Booming progress

The combat with Massachusetts provides to an extended listing of issues Robinhood has been coping with in latest months.

CEO Vlad Tenev was hauled earlier than Congress earlier this 12 months amid scrutiny over Robinhood’s buying and selling restrictions throughout the GameStop turmoil. Robinhood was additionally fined $65 million by the SEC for allegedly deceiving customers.
IPO vs SPAC vs direct listing: Explaining Wall Street's hot trendsIPO vs SPAC vs direct listing: Explaining Wall Street's hot trends
The firm was sued by the parents of a 20-year-old dealer who killed himself after he noticed a negative balance of $730,000 in his buying and selling account and mistakenly believed that was the sum he owed.

And but, regardless of this turbulent stretch for Robinhood, the firm continues to develop quickly — particularly in the crypto area.

During the first quarter alone, 9.5 million customers traded cryptocurrencies on Robinhood, in accordance to the firm. That’s up from simply 1.7 million throughout the closing three months of final 12 months.