Robinhood’s value tops $11bn on new funding round
Robinhood has raised new equity that gives it a valuation of more than $11 billion, according to the Financial Times.
New York-based hedge fund D1 Capital Partners invested $200 million in a Series G round for Robinhood on 17 August. This gives it a valuation of $11.2 billion.
Private investors — who have pumped more than $1.7 billion into the company since 2013, according to the data provider PitchBook — previously valued the trading platform at $8.6 billion in July.
D1, founded in 2017 by former Viking Global Investors fund manager Daniel Sundheim, is a first-time investor in Robinhood.
The hedge fund invests in a mix of public stocks and private securities and manages about $13 billion, according to FT sources.
Robinhood notes in a statement that its latest injection of funds would go towards “building our core product and improving the customer experience”.
The new valuation has increased by nearly one-third from a previous injection of funds just one month ago.
The privately-owned platform is mainly benefiting from a surge in activity through the coronavirus pandemic.
The latest fundraising is fuelling speculation that the company is preparing to sell shares to the public.
Michael Underhill, chief investment officer of Capital Innovations, a fund manager that invests in IPOs, tells the FT that he expects the company will press ahead with a listing before long. “Seeing that kind of jump in valuation [shows] they have velocity and momentum on their side,” he says.
In the first quarter of this year, Robinhood gained three million new customers, expanding its user base beyond 13 million.
In June, it eclipsed listed rivals including Charles Schwab and ETrade in “daily average revenue trades” — a popular industry measure of activity, according to data from the company.
Robinhood launched with the goal of “democratising finance” through free stock trading.
It makes money in part by selling its customers’ orders to electronic trading firms such as Citadel Securities. This is majority-owned by Ken Griffin, the billionaire hedge fund manager.
The company has faced a number of setbacks this year.
In February and March, the trading platform suffered repeated outages after sharp drops in prices led to overwhelming volumes. A group of customers filed a class-action lawsuit against the company in California over the matter.
Last month, the company scrapped plans to launch in the UK. This was its second stalling of its international ambitions, after the group announced a plan to enter Australia in 2015 that never occurred.
Robinhood has also faced scrutiny about the risks associated with providing sophisticated financial tools to everyday investors with little experience. Concerns came to a head in June, when Alex Kearns, a 20-year-old student, took his own life after wrongly believing he had lost nearly $750,000 from an options trade on Robinhood.
Bhatt and his co-founder Vlad Tenev expressed sorrow over the death and said they would consider alterations to the platform.