Robinhood Sets Terms For IPO: What You Need To Know

Robinhood, which revolutionized retail investing, has set the terms of its initial public offering, with the estimated pricing giving it a valuation of as much as $35 billion.

Robinhood's IPO Pricing, Valuation: Menlo Park, California-based Robinhood is proposing to offer 55 million shares at an estimated price range of $38 to $42, an updated preliminary prospectus filed with the SEC showed.

Of the shares earmarked for offloading through the IPO, 52.375 million Class A common shares will be offered by the company and the remaining 2.625 million by selling shareholders identified as the company's founders and CFO.

Robinhood clarified that it will not receive any of the proceeds from the sale of the shares being sold by the selling stockholders.

The company's three-class share structure consists of Class A, Class B and Class C common stocks. Each Class A share is entitled to one vote; each Class B share is entitled to 10 votes and is convertible at any time into one Class A share.

The Class C common stock has no voting rights and will convert into shares of its Class A common stock on a share-for-share basis.

Upon completion of the offering, all outstanding Class B common stock will be held by the company's founders, namely Baiju Bhatt and Vladimir Tenev. Tenev is now CEO of the trading app and Bhatt is chief creative officer and director.

Based on the shares outstanding as of March 31, 2021, at the completion of this offering, Robinhood will have outstanding a total of 703.87 million shares of Class A common stock and 131.81 million shares of Class B common stock. A the high end of the IPO price range, the valuation of the company works out to $35.1 billion.

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Robinhood has also granted an option for underwriters to purchase up to an additional 5.5 million of its Class A shares to cover overallotments.

The company said it expects to offer about $440 million to $770 million in Class Common stock for sales to Robinhood customers through the IPO Access feature on its platform, assuming the IPO is priced at the midpoint of the estimated price range of $38-$42.

Robinhood's Financials, Other IPO Terms: Given that Robinhood qualifies as an "emerging growth company" under the JOBS Act, it gets the leeway to make reduced public disclosures with respect to prospectus filing.

Underwriters for the offering include Goldman Sachs, JPMorgan, Barclays, Citigroup, Mizuho, JPMorgan and Wells Fargo Securities.

The company has applied for listing its shares on the Nasdaq under the ticker symbol HOOD.

Financials revealed in the filing show that Robinhood reported revenues of $959 million for the year ended Dec. 31, 2020, up about 245%, and net income of $7 million, reversing from a net loss of $107 million a year ago.

For the three months ended March 31, 2021, revenues rose 309% to $522 million and the loss was $1.4 billion, including a $1.5-billion fair value adjustment to the company's convertible notes and warrant liability. This compares to the loss of $53 million a year ago.

Robinhood said it expects to use the net proceeds from the offering to repay about $342.1 million it expects to borrow, shortly before completion of the offering, under its revolving credit facilities to fund its anticipated tax withholding and remittance obligations related to the IPO-Vesting Time-Based RSU Settlement and IPO-Vesting Market-Based RSU Settlement.

The remaining net proceeds, according to the company, will be used for working capital, capital expenditures and general corporate purposes, including increasing its hiring efforts to expand its employee base, expanding its customer support operations and satisfying its general capital needs.

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