Facing $70M in fines from regulators, Robinhood files for IPO

Published at: July 1, 2021

Stock and cryptocurrency trading app Robinhood has filed an application with the U.S. Securities and Exchange Commission for an initial public offering.

In a Form S-1 registration statement filed Thursday with the SEC, Robinhood said it intended to move forward with an initial public offering for its Class A common stock. If approved, the company said it plans to trade using the ticker “HOOD” on the Nasdaq and raise $100 million in the debut. Robinhood said it would reserve 20% to 35% of the shares for its users.

The IPO announcement comes just one day after the U.S. Financial Industry Regulatory Authority ordered Robinhood to pay roughly $70 million in fines related to its alleged “systemic supervisory failures” as well as restitution to customers it had allegedly caused “widespread and significant harm.” Robinhood reported in the filing that it had reached an agreement-in-principle with the regulatory body to pay the $57 million fine, but only $4.5 million in restitution to affected users.

In addition, Robinhood has faced multiple lawsuits from regulators, state authorities, and individuals related to the platform’s outages, account takeovers, and trading restrictions connected to the GameStop stock controversy. The company said it anticipates it will pay $15 million to the New York State Department of Financial Services related to “anti-money laundering and cybersecurity-related issues.”

The meme-based cryptocurrency Dogecoin (DOGE) played a large role in the trading app’s activity. Robinhood reported 34% of its total revenue from crypto in the first quarter of 2021 came from DOGE. The company claimed that its business could be adversely affected “if the markets for Dogecoin deteriorate or if the price of Dogecoin declines” without similar demand for other tokens on the app.

Robinhood reported in the SEC filing that it held $11.6 billion in crypto assets under custody as of March 31, with 17% of its total revenue in the first quarter of 2021 coming from cryptocurrency transactions. More than 9.5 million users traded roughly $88 billion in crypto over the same time period.

The trading app had said it was planning to go public last month but postponed the offering to July. The IPO, filed with the SEC, comes amid staff at the regulatory body conducting an examination into Robinhood’s outages, concerns over its options trading, and other issues related to its business.