Vlad Tenev and Baiju Bhatt, who co-founded Robinhood.
Marc Neuling | CNBC
FinTech hits billionaires every month.
Already this year, the co-founders of Coinbase have joined the ranks of billionaires, alongside the founders of Afffirm and Marqeta. For years, Silicon Valley has clashed with incumbent banking operators with the promise of a better customer experience, but only now are emerging trading apps, payment newbies, and online lenders reaching great valuations. on the public market.
Now it’s Robinhood’s turn.
Vlad Tenev and Baiju Bhatt, who were roommates at Stanford almost a decade ago, are each expected to be worth around $ 2.6 billion on paper when their trading app debuts on the Nasdaq later this month. This is based on the midpoint of $ 40 per share of the company’s price range given in its update. IPO prospectus Monday.
CEO Tenev and Creative Director Bhatt will each own 7.9% of the company’s outstanding shares, according to the filing. They also each sell about $ 50 million worth of shares from the offering.
It was a banner year for tech listings, with at least 12 companies going public through an IPO, direct listing, or Special Purpose Acquisition Company (SPAC) hitting a mark. market capitalization of $ 10 billion or more. Between those companies and a few others with lower valuations, the tech industry hit 16 billionaires in 2021.
Fintechs capture a disproportionate share of the gains.
Coinbase CEO Brian Armstrong owns shares of his cryptocurrency app worth around $ 8.7 billion after the company was directly listed in April. Fred Ehrsam, who co-founded the company with Armstrong in 2012, has a stake of $ 2.7 billion. Marqeta CEO Jason Gardner is worth nearly $ 2 billion after going public with his payments technology company last month, while Affirm’s Max Levchin owns shares valued at over $ 1.5 billion in its online lender, which went public in January.
Coinbase Founder and CEO Brian Armstrong attends Consensus 2019 at the Hilton Midtown on May 15, 2019 in New York City.
Steven Ferdman | Getty Images
SoFi, a provider of college loans, home loans, and various investment and insurance products, went public through a SPAC in June and is now valued at $ 12 billion. Granted, no individual holder owns a billion dollar stake.
This is before tapping into companies that are still private. Payments company Stripe was valued at $ 95 billion in a March funding round, giving co-founders Patrick and John Collison a combined $ 23 billion stake, according to the Bloomberg Billionaires Index. Klarna, a Swedish payments company, is now worth $ 46 billion in the private market. Klarna CEO Sebastian Siemiatkowski has a net worth of $ 2.2 billion, according to Forbes.
The list goes on. Chime, which provides banking services through mobile phones, is worth $ 14.5 billion, while Plaid, which provides back-end technology that connects apps to bank accounts, is valued at $ 13 billion after Visa was forced to abandon its plan to acquire the company.
“Our market is undergoing a radical change, with consumers who we never thought would embrace digital finance in any significant way,” Plaid CEO and co-founder Zach Perret told CNBC during the announcement of the last round of financing in April.
Robinhood said he plans to sell shares at $ 38 to $ 42 each ahead of his expected Nasdaq debut next week. That could value Robinhood as much as $ 35 billion, up from a private market valuation of $ 11.7 billion in September.
Users flocked to Robinhood in the first quarter as crypto trading volumes skyrocketed and the popularity of meme stocks like GameStop and AMC Entertainment drove millions of new traders to the app. Robinhood had 17.7 million monthly active users at the end of March, up from 11.7 million at the end of 2020.
Robinhood co-founders will retain control of the votes
Tenev, 34, and Bhatt, 36, have faced their share of troubled headlines this year on their way to what will likely be one of the biggest IPOs of 2021.
While the increase in activity was a major boon to Robinhood’s revenue, the company had to stop trading GameStop and other stocks in January as the unexpected increase in volume created a cash shortage. .
“In order to protect the company and our customers, we had to limit the purchase of these shares,” Tenev told CNBC. Andrew Ross Sorkin after the restrictions were put in place.
Robinhood ultimately raised $ 1 billion from investors to strengthen its balance sheet, but the incident raised questions about the company’s business model, known as payment for order flow. Robinhood allows users to buy and sell for free, and charges market makers such as Citadel Securities or Virtu for the right to execute client transactions.
The Financial Industry Regulatory Authority said in June that Robinhood will pay around $ 70 million in penalties for its system-wide outages and deceptive communication and trading practices. The company faces dozens of proposed class actions, as well as reviews or investigations by regulators, state attorneys general, the Securities and Exchange Commission, FINRA and the US Department of Justice.
In its initial flyer earlier this month, Robinhood revealed that Tenev’s phone was seized by federal attorneys as part of the GameStop investigation.
Still, Robinhood’s co-founders – who are both board members – are well positioned to make big profits when the company goes public and controls the vast majority of decisions from here.
Tenev and Bhatt will own all of Robinhood’s Class B shares after the offer. These shares have 10 times more voting rights than Class A shares, according to the prospectus, giving Tenev control of 26% of the voting rights and Bhatt of 39%.
They have already cashed tens of millions of dollars in stocks.
In 2018, they each sold $ 55 million of shares to investment firm DST Global as part of a side transaction, and the following year the co-founders participated in a takeover bid of $ 67 million. , $ 6 million available for “some of our employee shareholders”, according to the file.
Robinhood is a quintuple CNBC 50 disruptor company that topped this year’s list.
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