Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.

Robinhood's IPO

How to trade Robinhood's IPO

Robinhood is an American financial services company that offers commission-free trading on stocks and exchange-traded funds (ETFs) through its mobile app. Founded in 2013 and launched in 2015, it is said to be used by over 13m users around the world. Robinhood is planning an initial public offering (IPO) at the end of July 2021, which could interest a large number of investors and traders alike, due to some controversies that the company has experienced so far. Learn how to get involved with Robinhood’s IPO and start trading on newly-listed Robinhood shares on our Next Generation trading platform.

UK flag logo
FCA regulated
FSCS logo
Segregated funds
LSE logo
LSE listed

28 July 2021

Robinhood is to launch its IPO

$35bn+

Robinhood IPO valuation

309%+

Robinhood's revenue growth Q1 2021

Auto populate with H2 title tags
To override set attribute data-secondarysidenav-title="New Title" to parent section module

When will Robinhood’s IPO date be?

Robinhood confirmed in a blog post at the end of March 2021 that the company has filed confidentially for an IPO, which is expected to go ahead on 28 July 2021. Robinhood won’t have to make its financials public until 15 days before the offering, meaning that there could be a hurried scramble upon announcement of the date. Traders should keep an eye out for any news announcements during this period.

It has decided to list on the NASDAQ stock exchange, which is a popular choice for technology companies due to the NASDAQ’s reputation of holding many innovative and growth-orientated stocks. Remember to take stock market hours into consideration as it will begin trading later into the US session on the day.

Learn more about upcoming IPOs.

What will Robinhood’s share price be?

Robinhood’s share price is expected to be between $38 and $42. The company was last valued at around $12bn in its most recent financing round, which took place in September 2020. However, this valuation was made prior to some controversies that the company has faced, including the GameStop saga, as well as various lawsuits from users of the platform. Whereas some analysts are predicting a more likely figure of $20bn or even $40bn, others are predicting Robinhood’s valuation to have dropped in 2021. The company itself is aiming for a valuation of around $35bn and will trade under the ticker 'HOOD'.

How to trade on Robinhood's IPO

1. Register for a CMC Markets account

Follow our simple registration process and deposit funds to get started trading the live markets.

2. Pick a strategy

Choose whether you want to go long (buy) or go short (sell). Please note that some trading restrictions may apply on initial trading.

3. Choose your product

Spread betting is our most popular product and it is tax-free in the UK*, whereas share CFDs do not require you to pay stamp duty and are available globally.

4. Consider risk-management controls

Robinhood stock may be in high demand on the day and this can cause volatility within the market, so you don’t want to lose out due to slippage or gapping on price charts.

How does Robinhood make money?

Although Robinhood acts as a commission-free brokerage, it is reported to have made $331m in the first quarter of 2021 from customers’ trading activity. This is through various avenues including payment for order flow (PFOF), where a broker directs orders placed by users of the app to external high-speed trading venues, in exchange for a fee. However, PFOF is banned in a number of countries including the UK, which means that international expansion may not provide the growth that the company is looking for. It is also a risky move to be reliant on one customer or revenue stream such as Citadel, who is the main company buying the order flows.

Other ways that Robinhood gains revenue is through securities lending, as well as offering traders the ability to buy cryptocurrencies such as Bitcoin and Dogecoin on the app. Robinhood users can also trade options on the app, which is a major selling point for the company, given that successful trades can result in quick and large profits.

Robinhood financials pre-IPO

Robinhood has experienced major growth over recent years. Since 2013, the platform has gained almost 20m users, a third of which joined just in the first quarter of 2021. Barron’s magazine reports that the company is on track to make over $1-2bn in revenue this year, should the level of trader activity keep up.

With a potential $40bn valuation, this would give Robinhood around one third of the total market capitalisation of Charles Schwab. This is astonishing, given that the app was founded decades after the establishment of Charles Schwab and the fact that it has only a small fraction of assets under management in comparison.

What are the risks of trading on Robinhood’s IPO?

Robinhood has come under fire for a number of incidents in the last year, which could label the company’s IPO as a potentially controversial one. We explore the risks of trading on Robinhood newly-listed shares below.

GameStop short squeeze saga

A number of lawsuits

Criticism from others

Robinhood & GameStop saga

In January 2021, Robinhood came under fire as flocks of retail traders joined the app to buy stock in companies such as GameStop and AMC Entertainment in order to cause a short squeeze​. This was driven by a trend on WallStreetBets, a stock and option trading based community on the online social forum Reddit. This action gained Robinhood a record-breaking 3m new users. The company decided to restrict trading on these volatile stocks to meet capital requirements, which sparked outrage from the trading community and led CEO Vladimir Tenev to testify before congress. As a result, many users have decided to boycott the platform and take their investments to competitors elsewhere.


Robinhood lawsuits

  • Robinhood was accused of failing to disclose its payment for order flow practise. The company paid out a $65m fine in December 2020 to the SEC.
  • The Financial Industry Regulatory Authority (FINRA) fined Robinhood for failing to give its customer the best prices for trades, resulting in a $1.25m payment.
  • The company was sued at the start of 2021 by the family of a 20-year old user who took his life after racking up debts of $730,000 on the app. It has been criticised for a lack of support and risk-management training for less experienced traders.
  • The company was sued after failing to report its fractional share service, which it introduced in 2019. Fractional shares give investors easy access to high-priced shares such as Amazon, which is another major selling point for Robinhood. However, the company only started publicly reporting trade executions in January 2021, leading to controversy and a lawsuit.


Criticism from others

Robinhood has been criticised for its business model and practises by various high-profile investors and companies. For example, Warren Buffet and Charlie Munger from conglomerate holding company Berkshire Hathaway have both expressed their dissatisfaction for the way that Robinhood conducts business, comparing the app to a casino for the stock market. The company has previously also been accused of using gamification techniques, such as the use of digital confetti when a trader places a trade, resulting in scrutiny from investors and competitors.

However, Robinhood has always defended its app as being simpler and more accessible to a wider audience and a new generation of traders. As we look towards the upcoming IPO, management appears to have taken the decision to remove these gamification features in an attempt to try and create a more professional look and feel, and head off regulatory concerns that the company is underplaying the risks of trading on financial markets.

Read about how to protect your capital from volatile or unexpected trading scenarios in our risk-management guide​.

Why trade on Robinhood’s IPO with us?

We’re no.1 for customer service**

Over 30 years experience within the industry

Trade anywhere with our award-winning app

Who are Robinhood’s competitors?

Robinhood has a number of competitors within the trading and investing markets, such as Plus500, Charles Schwab, Public, TradeStation and Acorns, some of which are available to trade on our Next Generation trading platform.

Although it isn’t often that Robinhood’s low fees can be beaten, the app’s popularity has led other brokers to cut their commissions in order to meet the increasing demand for low-fee stock trading. Competitor Charles Schwab recently completed an acquisition of the electronic trading platform TD Ameritrade, and Morgan Stanley bought a similar platform, E-Trade.

FAQ

How can I participate in Robinhood’s IPO?

With a spread betting or CFD trading account, you can participate in Robinhood’s upcoming IPO by speculating on the company’s price movements as it debuts on the stock market. Spread bets and CFDs provide you with leverage, enabling you to magnify your trading gains (or losses) when compared with just buying the underlying asset outright with the same amount of starting capital. If you think the IPO will debut at a higher value, you could open a buy position, or a sell position if you think that it will fall. Open a trading account to get started.

Will Robinhood’s IPO be profitable?

Although Robinhood has a fairly high valuation, there is no guarantee that it will be a successful or profitable IPO. Often, shares may debut on the stock market at a much lower or higher price than expected, which can affect your open positions. Read about how to manage risk in trading.

Can I buy pre-IPO Robinhood stock?

It isn’t possible to buy pre-IPO Robinhood stock with CMC Markets as we offer derivative products such as spread bets and CFDs. However, once the share is listed publicly, you can get involved, so learn more about how to trade derivatives.

Who are the underwriters for Robinhood’s IPO?

The main underwriters for Robinhood’s upcoming IPO are multinational investment bank Goldman Sachs. The company has also raised over $2bn in funding from private investors, including Sequoia and Ribbit Capital, as well as being backed by celebrities Snoop Dogg and Jared Leto.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.