The controversy swirling round Robinhood is a textbook instance of the kind of consideration startups search to keep away from earlier than launching an IPO. But the market is so scorching that it might not matter and Robinhood seems to be forging forward with what might be one of many highest profile IPOs of the yr.
“You would be negligent not to take the company public now,” David Weild, the previous vice chairman at Nasdaq, informed NCS Business. “This is one of the greatest markets of all time. That stuff doesn’t hang around long. So, full steam ahead.”
Best begin to a yr for IPOs ever
But old style IPOs are on fireplace, too. US-listed conventional IPOs have raised $34.9 billion to this point in 2021, practically 5 occasions what they raised by means of the identical interval final yr, Dealogic reviews. That’s the best for this level of any yr since 1995.
In quick, the market is welcoming high-growth corporations with open arms. And traders are unlikely to be scared by Robinhood’s baggage — particularly in this interval of rock-bottom rates of interest.
“What are the alternatives? There is massive liquidity in the market,” stated Weild, who is now the CEO of funding financial institution Weild & Co.
Valuation haircut for Robinhood?
Some of Robinhood’s rivals are additionally going public.
“The Robinhood IPO process is underway,” Kathleen Smith, principal at Renaissance Capital, wrote in an e mail.
Smith, whose agency runs an ETF targeted solely on the US IPO market, predicted “strong interest” amongst traders and an in the end “successful IPO” for Robinhood. But she warned that obstacles, together with regulatory scrutiny over Robinhood’s enterprise mannequin, “may cause investors to put a haircut on its valuation.”
In truth, the destructive stability would have been erased by the train and settlement of choices he held, the lawsuit stated. Robinhood stated it was “devastated” by the suicide and that it has made a collection of enhancements to its platform, together with stay voice help for some clients and offering further steering.
Booming consumer development could trump PR nightmares
Still, traders are possible to be impressed by how quickly Robinhood is rising — regardless of, or even perhaps due to — the corporate’s controversies. Its zero-commission enterprise mannequin remodeled the web buying and selling trade, forcing established rivals comparable to TD Ameritrade and Charles Schwab to observe go well with and search merger companions to survive.
“I don’t think the market will punish [Robinhood]. Their growth is strong. Their business model is strong,” stated Robert Le, fintech analyst at PitchBook. “Even in January, with customers angry, they still had over 1 million customers sign up.”
“Robinhood has the potential to be a much larger financial institution than some discount brokerages of the past,” Le stated, including that it has the model recognition to push into new areas together with checking accounts, retirement merchandise and credit score.
“They won’t end up like E*Trade: a slow-growing brokerage comfortable in their space that just chugged along after their IPO,” Le stated. “I don’t see Robinhood going that route.”