Robinhood Prepares for IPO Despite Controversy

Robinhood, an online brokerage firm that has become a major trading platform for retail investors in the US, has filed documents for listing on Nasdaq. A few months ago, it was the company that caused a tussle between young retail investors and Wall Street hedge funds.

Last year, after the lockdown due to Corona, there was a significant increase in trading in the stock market by retail investors in America and Robinhood became a big tool for these investors. Documents related to the IPO show that the company’s revenue increased 245 percent to $959 million last year and its profit was $7 million. A year earlier, the company had reported a loss of $107 million.

Robinhood was started eight years ago by Stanford University students Vlad Tenev and Baiju Bhat. The platform allows users to trade stocks, ETFs, options and cryptocurrencies without commission.

The startup has faced multiple allegations of wrongdoing and has paid more than $136 million to settle cases with regulators. It also includes a $7 million penalty recently imposed by the Financial Industrial Regulatory Authority.

Robinhood’s spending on legal matters also increased rapidly. It was a little over $1 million two years ago and rose to $105 million last year.

Trading restrictions were also imposed on the company earlier this year following a tussle between retail investors and Wall Street hedge funds. The company had said that the regulators have sought information from it for investigation. Authorities also confiscated the mobile phone of its CEO Vladimir Tenev.

Robinhood’s business model is also being scrutinized by the regulators. It involves payment-for-order-flow in which retail orders are routed through wholesale brokers in exchange for payment by brokers. It accounts for a major share in the company’s revenue.

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