Stock trading app Robinhood is targeting a valuation of up to $35 billion in its initial public offering—meaning its two cofounders are set to add billions to their fortunes—according to an amended SEC filing on Monday.
The highly anticipated IPO will make Robinhood’s billionaire cofounders, Vlad Tenev, 34, and Baiju Bhatt, 36, even richer. According to the updated filing, Tenev holds 54.3 million shares of class B stock, while Bhatt has 80.2 million shares. The two cofounders each plan to sell around 1.25 million class A shares as part of the deal. At $40 per share, the midpoint of the proposed offering range, Tenev’s stake in Robinhood would be worth around $2.2 billion and Bhatt’s would be worth $3.2 billion, Forbes calculates.
The mobile-friendly discount brokerage, which pioneered commission-free stock trades, aims to raise as much as $2.3 billion in its upcoming public market debut, which could happen as early as next week. The company plans to sell a total of 55 million shares at a range of $38 to $42 per share, trading under the ticker “HOOD,” according to its updated prospectus.
Taking into account various awards and restricted stock units, after the IPO closes, Tenev and Bhatt will each own a 7.9% stake in the company, and hold all class B stock, which have 10 votes per share, according to filings. In total, Tenev will have 26.2% voting power, while Bhatt will have 39%.
Robinhood’s last private market valuation was $11.7 billion, following a fundraising round in September 2020. That valuation made Tenev and Bhatt billionaires, worth $1 billion each, according to Forbes.
Robinhood’s initial S-1 filing from earlier this month also disclosed an incentive-laden restricted stock award plan that could earn cofounders Tenev and Bhatt billions of additional dollars in coming years. In late May, Robinhood’s board approved awards of 22,200,000 and 13,320,000 restricted stock units to Tenev and Bhatt, respectively, which will vest over eight years after its IPO depending on how the company’s stock performs.
If Tenev and Bhatt achieve each of these price-based stock milestones, which range from Robinhood reaching $120 per share to $300 per share, the total award would be worth over $7.5 billion based on current pricing. Tenev could stand to make an additional $4.7 billion, while Bhatt could make over $2.8 billion.
The pair cofounded Robinhood in 2012, after meeting as undergraduates at Stanford University in 2005. They launched the trading app in 2013, with the mission to “democratize finance for all.” Robinhood was the first to pioneer commission-free trading, disrupting the entire brokerage industry and eventually leading to larger rivals like E-Trade, Schwab and TD Ameritrade to all follow suit by slashing fees. Since the onset of the Coronavirus pandemic in 2020, Robinhood’s business has grown exponentially, bringing its active users to more than 21 million as droves of millennials took to the app to trade stocks and options during quarantine.
Robinhood’s ascent hasn’t been without growing pains, however: The company has been besieged by technical problems and regulatory scrutiny. Just last month, Robinhood was hit with a record $70 million fine by regulatory body FINRA, which revealed how the company had lost clients’ money due to chronic outages and incorrectly sending margin calls on millions of options trades.
In June 2020, Forbes first reported that a 20-year-old Robinhood customer, Alex Kearns, died by suicide after seeing a negative $730,000 balance on his account due to options trading. Two days later, Robinhood’s founders pledged to tighten eligibility criteria, educational resources and upgrades to its user interface for customers trading options. The Kearns family sued Robinhood in February in a wrongful death suit.
Robinhood has also come under fire for how it makes money. Last August, a Forbes investigation spelled out how the company generated the bulk of its trading revenue off of speculative options trades made by customers. A large chunk of Robinhood’s transaction revenues—over 80%, according to SEC filings—comes from so-called “payment for order flow,” essentially selling customers’ orders to trading titans like Citadel Securities.