IPO: Broker app Robinhood raises around 2.1 billion dollars

The company announced on Thursday night that it had sold 55 million shares for $ 38 each. This brings Robinhood to a total valuation of almost 32 billion dollars before the start of trading on the Nasdaq tech exchange. Robinhood had aimed for an overall valuation of 35 billion and thus missed its target. The company, which was founded in 2013, has gone through some far-reaching missteps and has already had to pay large fines.

In early 2021, retail investors got together to buy certain stocks. Large investors had bet on falling prices by selling short, but then the price skyrocketed. As a result, Robinhood temporarily restricted trading in the stocks concerned – they could no longer be bought in the app.

That caused outrage on social media. Robinhood was accused of working with hedge funds, which led to a wave of negative reviews of the Robinhood app on Google Play. But Google deleted at least 100,000 reviews later because they were “coordinated” and that is not allowed.

Robinhood was sued by the parents of the late college student Alex K. because the app caused him great emotional stress through misleading communication and negligence, which is said to have ultimately driven him to suicide.

The broker app Robinhood is said to have last reported a loss of $ 730,000 to the student. Shortly before his suicide, he contacted customer support several times, but they only replied with automatic e-mails. In an email from this, he is said to have been asked to deposit $ 178,000 into his account. His farewell letter ends with the words “Fuck Robinhood”. One day after his death, Robinhood reported that his options trading was covered.

After the incidents, the securities regulator FINRA stepped in and grunted Robinhood the highest sentence in its history. She fined nearly $ 70 million. The online broker neglected its duty of care and misled and even harmed millions of customers, the authority said. The list of misconduct is long: misleading or incorrect information, system failures in the event of strong market movements, incorrect account balances and insufficient warnings about risks. Nevertheless, the IPO went smoothly.

Robinhood is an easy-to-use app for trading stocks, options and cryptocurrencies and pioneers a younger generation of investors in the US financial market. However, it has a controversial business model. The broker does not take any fees from users, but earns money by brokering their transactions.

Critics accuse Robinhood of encouraging customers like a gambling provider to do as much and risky trading as possible. The company defends its business model by “democratizing” the financial market.

The app is not on the market in Germany.


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