A potential Robinhood initial public offering (IPO) could be at risk following its ban of popular stocks targeted by Reddit traders this week.
While there’s no official news concerning a Robinhood IPO, rumors have been floating around. The current batch claim that the company is aiming to go public this year and that it has entered into talks with Goldman Sachs (NYSE:GS) for the IPO.
The problem now is its banning of stocks such as GameStop (NYSE:GME) and AMC Entertainment (NYSE:AMC). These were both stocks that retail investors on Reddit WallStreetBets were boosting up, which was, in turn, hurting hedge funds.
Axios writer Dan Primack sums up the issue well with this statement.
“Robinhood not only has a big user trust problem, it also may have a political problem. And that translates into an IPO problem, as the company is said to be on the verge of filing confidential paperwork.”
This Tweet also shows the trust issues Robinhood is now dealing with.
Fixed the @RobinhoodApp mission statement… pic.twitter.com/xJ5cgtSrfZ
— Kings of Capitalism (@CapitalismKings) January 28, 2021
Here’s what other experts have to say about how the Reddit fallout could affect a Robinhood IPO.
I have been bashing Robin Hood for a long time. I believe it was great that they forced the big guys to lower commissions to zero.
BUT, they have been scalping small investors for too long AND now this!
Unacceptable.
The value of a potential IPO is plummeting!— Matt McCall (@MatthewMcCall) January 28, 2021
I've never shorted but when I do it'll be when ROBINHOOD IPO comes out
— Chris Randone (@ChrisRandone) January 29, 2021
You can almost see in real time the billions in market cap moving from the Robinhood IPO to the Coinbase IPO
— Barry Silbert (@BarrySilbert) January 29, 2021
To think WeWork will have gotten closer to going IPO than Robinhood.
— Douglas A. Boneparth (@dougboneparth) January 28, 2021
Perhaps a non-popular take: Yesterday was a net positive for Robinhood's IPO, and the investors who injected $1B will see a massive return on that investment.
— Austin Rief ☕️ (@austin_rief) January 29, 2021
Investors wanting to dive deeper into the Reddit and Robinhood drama can check out the following articles.
- Robinhood Bans GME and 7 Other High-Flying Reddit Stocks: What to Know
- Robinhood Ban Sparks Major Backlash via Tweets, 1-Star Reviews and App Deletions
- Robinhood Class Action Lawsuit 2021: Investors Take Action After App Bans Stocks
On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article.
