Gamestop – Robinhood files for IPO despite ongoing lawsuits and fines
Robinhood files for IPO
Robinhood became popular due to its ease of use and gamified stock trading features. The company has agreed to pay $70 million in fines and restitution after the meme stock trading shutdown in January.
According to Axios, Robinhood filed for its IPO on Thursday with 35% of its shares set aside for trading. It will be listed on the Nasdaq under Fintech Zoom symbol “HOOD.”
Paying the $70 million fine was the last hurdle needed for Robinhood to make its IPO public. The 20% to 35% of stocks set aside for initial trading will be available to company customers at the IPO price.
The rush to trade meme stocks in January left Robinhood without any liquid cash to approve trades, so it had to halt the trade to the consternation of its customers. This resulted in over 49 class action lawsuits and investigations by regulators, DOJ, and the SEC.
Investigations are ongoing, according to Robinhood’s S-1 filing. The company noted it cannot determine the likelihood or magnitude of any further losses due to these ongoing cases.
A Reddit thread made it clear that several people planned to force Gamestop’s stock value to surge in order to “save the company” from hedge funds. This was among several “meme stocks” that people were buying up to boost the stock value above the company’s actual worth.
When traders saw Gamestop’s stock falling Robinhood traders began buying and selling in a frenzy, using up all of Robinhood’s liquid cash to hold pending trades. This forced the company to act and halt trading, which had numerous effects on trade as people could sell falling stock and others couldn’t buy into fast growing stocks.
This trading debacle saw the company lose $1.44 billion on $522 million in revenue over the first three months of 2021. These losses were covered by the cash the company had on hand, but it was a blow to the company seeking public trade.
Investigations are still ongoing, but Robinhood’s IPO is still happening. Anyone interested should become a member of Robinhood before the IPO to trade its stock at the initial offered price.
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