Robinhood Markets’ IPO is slated for Thursday.
Photo illustration by Justin Sullivan / Getty Images
The management of Robinhood Markets, which is to list its shares on Thursday, emphasized the need for equal access to the financial markets at a virtual roadshow on Saturday.
Sitting on a white couch, Robinhood’s leadership – the company’s two co-founders, Chief Executive Vlad Tenev and Chief Creative Officer Baiju Bhatt, along with Chief Financial Officer Jason Warnick – spoke about the company’s groundbreaking past and answered questions from the public.
The US financial markets are one of the largest sources of wealth accumulation worldwide, Bhatt said at the beginning of the event. “However, access to the markets is unevenly distributed,” he said. “Some had better access, more useful tools, and a clearer invitation to participate than others. We believe that a result of this has been the growing inequality gap in our nation. Our mission is to fix that. ”
Robinhood, which offers commission-free trading through its controversial investment app, is set to sell shares to the public on Thursday as part of one of the most anticipated IPOs or initial public offerings of the year. Robinhood is targeting a valuation of $ 35 billion. It offers 55 million shares; the current target price range is between $ 38 and $ 42 per share. It is traded on the Nasdaq under the ticker HOOD.
Robinhood will provide up to 35% of its shares in the IPO for sale to its customers via the company’s IPO access function, according to a prospectus. IPO Access gives retail investors the ability to buy shares of some new issues before they start trading on an exchange. “We expect this to be one of the largest retail awards ever made,” said Tenev. “This is a very special moment and we are humble.” Tenev added that the allocation of shares to customers is “random”.
Robinhood generates most of its revenue from order flow payments, or PFOF, but the company plans to expand its revenue stream, Warnick said. PFOF refers to the practice of directing customer trades to trading companies who execute the transactions and benefit from the bid-ask spread. Eighty-one percent of Robinhood’s first quarter sales came from PFOF.
But PFOF has been scrutinized. The Securities and Exchange Commission is reviewing the practice, leading some to believe it could be banned, the Wall Street Journal reported earlier this month. In December, Robinhood agreed to pay $ 65 million to settle fees that had misled customers about payments from trading companies that overcharged users for executing transactions.
“We plan to work with regulators to make sure they understand how important payment is to the flow of orders for retail investors,” Warnick said during the roadshow. “It enables investors to invest smaller amounts without having to worry about commissions.”
PFOF is a “better offer for customers than the old commission structure” of the brokerage industry, said Warnick. However, if the practice were banned or restricted, “Robinhood and the industry would adapt,” he said.
Robinhood expects to invest more in Robinhood Gold, which will give clients access to professional research, instant deposits from $ 5,000 and margin trading when approved, according to the company’s website.
Robinhood also wants to expand internationally. The Menlo Park, Calif. Company currently has multiple offices in the United States – including locations in Denver, New York, Washington, DC, Seattle, and Chicago – and an office in London. “We are very committed to making Robinhood a global company,” said Tenev.
The comments came during a live public video stream of Robinhood’s Roadshow. Management teams typically use roadshow events to introduce their company to potential investors such as hedge funds and institutional investors.
Robinhood is also interested in offering Roth and Roth IRAs, Tenev said. But one thing the company doesn’t want to offer is dividends. “We currently have no plans to pay dividends,” said Warnick.
Robinhood asked the public to ask questions in the run-up to the roadshow. One question had nothing to do with finance: Tenev, an amateur astronomer, was asked to name his favorite planet. “Definitely Pluto,” he said jokingly, although he later added that he probably had a “fondness for Venus.”
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