Why Robinhood is keeping its IPO filing confidential

CEO Vlad Tenev.
CEO Vlad Tenev.
Image: Reuters/Brendan McDermid
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Robinhood, the brokerage that has become a byword for the boom in retail trading, is planning to go public. Like many companies that embark on an initial public offering these days, Robinhood is keeping its registration confidential.

The Menlo Park, California-based fintech said yesterday (March 23) that it provided its S-1 statement to the Securities and Exchange Commission and expects to offer shares to the public sometime after the regulator finishes its review. The company will list on the Nasdaq exchange and may make shares available to the more than 13 million retail traders who use its platform, according to Bloomberg. Companies from ride-sharing company Lyft to Palantir, the big-data specialist, have used the confidential process.

What is a confidential IPO filing?

Filing confidentially doesn’t mean Robinhood’s IPO is a secret, but it does give the company scope to withhold information longer than it would otherwise. This way competitors like Charles Schwab and E-trade may have to wait a few months longer to see some key financial details, and Robinhood employees will also have to wait to find out how much the company’s executives are getting paid, said University of Florida professor Jay Ritter. And because some IPOs fail to get off the ground, if the company hasn’t ever filed publicly, that information will remain confidential.

A confidential registration also gives the company some flexibility on timing. “With a traditional IPO, once you file paperwork and the train has left the station, it’s hard to stop it,” Sandeep Dahiya, associate professor of entrepreneurship at Georgetown University’s McDonough School of Business, told Forbes. “That’s the beauty of a confidential IPO—there’s no set date and more flexibility.”

How much is Robinhood’s IPO valuation?

Robinhood was valued at $11.7 billion in its private fundraising round in September, and the company could be valued at more than $20 billion in an IPO, according to a Reuters report. Secondary market data in January for Robinhood’s private shares signal a valuation even higher than that, of around $40 billion, according to data from Rainmaker Securities.

Confidential filings have been an option since 2012 under the JOBS Act, but they were originally only available to companies with less $1 billion of annual revenue (so-called “Emerging Growth Companies”). The SEC has made confidential filings available to all firms since 2017. Companies that file confidentially still have to provide an S-1 registration statement to the public three weeks before the offering to give investors time to assess the deal.