The management of Robinhood Markets, which is scheduled to list its shares on Thursday, emphasized the need for equal access to financial markets during a virtual roadshow event on Saturday.
Seated together on a white couch, Robinhood’s leadership—the company’s two co-founders, Chief Executive Vlad Tenev and Chief Creative Officer Baiju Bhatt, along with Chief Financial Officer Jason Warnick —spoke about the company’s groundbreaking past and answered questions from the public.
The U.S. financial markets are one of the greatest sources of wealth creation in the world, Bhatt said at the start of the event. “However, access to the markets have been unevenly distributed,” he said. “Some have had better access, more useful tools and a clearer invitation to participate than others. We believe that an output of that has been the growing inequality gap in our nation. Our mission is to fix that.”
Robinhood, which offers zero-commission trading via its controversial investment app, is slated to sell shares to the public on Thursday in one of the year’s most anticipated initial public offerings, or IPOs. Robinhood is targeting a $35 billion valuation. It is offering 55 million shares; the current targeted price range is $38 to $42 a share. It will trade under the ticker HOOD on the Nasdaq.
Robinhood is setting aside as much as 35% of its shares in the IPO for sale to its customers through the company’s IPO Access feature, a prospectus said. IPO Access gives retail investors the chance to buy shares of some new issues before they begin trading on an exchange. “We anticipate this would be one of largest retail allocations ever,” said Tenev. “This is a very special moment and we’re humbled.” Tenev added that allocations of stock to customers would be “random.”
Robinhood earns most of its revenue from payments for order flow, or PFOF, but the company plans to expand its revenue streams, Warnick said. PFOF refers to the practice of routing customers’ trades to trading firms that execute the transactions and profit from the bid-ask spread. Eighty-one percent of Robinhood’s first quarter revenue came from PFOF.
But PFOF has come under scrutiny. The Securities and Exchange Commission is reviewing the practice, leading some to believe that it could be banned, the Wall Street Journal reported earlier this month. In December, Robinhood agreed to pay $65 million to settle charges it misled customers over payments from trading firms that overcharged users to execute transactions.
“We plan to fully engage with regulators to make sure they know how important payment for order flow is for retail investors,” Warnick said during the roadshow. “It allows investors to invest smaller amounts without worrying about commissions.”
PFOF is a “better deal for customers than the old commission structure” of the brokerage industry, Warnick said. However, if the practice is banned or limited, “Robinhood and the industry would adapt,” he said.
Robinhood expects to invest more in Robinhood Gold, which gives customers access to professional research, instant deposit starting at $5,000, and, if approved, margin trading, according to the company’s website.
Robinhood also aims to expand more internationally. The Menlo Park, Calif., company currently has several offices in the U.S.—including locations in Denver, New York, Washington, D.C., Seattle, and Chicago—and an office in London. “We are very committed to making Robinhood a global company,” Tenev said.
The comments came during a live, publicly available videostream of Robinhood’s roadshow. Management teams typically use roadshow events to pitch their company to prospective investors such as hedge funds and institutional investors.
Robinhood is also interested in offering Roth and Roth IRAs, Tenev said. But one thing the company doesn’t plan to offer is dividends. “We don’t have any plans to pay any dividends at this time,” Warnick said.
Robinhood had asked the public to submit questions in the lead-up to the roadshow. One question had nothing to do with finance: Tenev, an amateur astronomer, was asked to name his favorite planet. “Definitely Pluto,” he said jokingly, although he later added that he probably has a “preference toward Venus.”
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Corrections & amplifications: The acronym for payments for order flow is PFOF. A prior version of this article incorrectly stated the acronym.