Since the Robinhood trading app has drawn attention to the stability of the US stock markets. As a strategy of high access to financial markets, the app has sparked interest in the stock market from a younger group of traders keen to take on Wall Street scammers. Despite a series of crises this year. The Robinhood app is growing faster than ever and is on track to achieve a multibillion dollar IPO in the coming months.
The disruption caused by the app’s success has drawn a lot of criticism from more established players, who claim that the app makes transactions too easy and makes the investment process much less secure. While this may be true in some cases, it also proves that the availability of the app has served to hamper the business models of major industry players, who were charging investors high enough fees to trade stocks and shares on theirs. platforms. However, the success of Robinhood has forced the major brokers to improve and lower their fees to be competitive. Freedom24 is an example of a brokerage firm: dynamic and reliable, it has experience and expertise in the US stock market. It provides robust trading platforms and technologies to the market. Thanks to their brokers, investors have direct access to the stock markets and are guaranteed to be able to participate in IPOs.
The company recently took steps to mitigate some of the criticism. After being a private company for eight years, Robinhood filed in March the necessary documents to go public. Sources told CNBC that she chose the Nasdaq as her exchange. She remains on the IPO path and has built her management teams with veterans from Wall Street and Silicon Valley.
Negative PR and Blackouts Affect Robinhood
The popularity and success of Robinhood presented the young financial technology firm with its own set of challenges, including interruptions or suspensions of transactions as its IT infrastructure struggled to cope with the huge volumes transmitted. In turn, those interruptions sparked a significant amount of negative public relations, which ultimately led to a congressional hearing into the events surrounding the rise and suspension of GameStop stock earlier this year.
(Source: Intelligent Trend Follower)
Yet Robinhood is one of the fastest growing fintech startups and has become one of Silicon Valley’s most valuable private unicorns – and is the first company on this year’s CNBC Disruptor 50 list. Robinhood is valued at $ 11.7 billion, with its main backers being Sequoia Capital and Andreessen Horowitz, NEA, Kleiner Perkins and GV, the venture capital arm of Alphabet, the parent company of Google. Its IPO should allow a valuation of at least three times this amount. To prepare for its IPO, the company recruited executives with experience from Google, Facebook, Amazon, and the Securities and Exchange Commission.
In the run-up to Robinhood’s IPO, the tech unicorn has managed to tap into a previously untapped user base of new investors, who during the lock-in appear to have used their US stimulus payments to generate renewed interest in the functioning of financial markets. Maxim Manturov, head of investment research at Freedom Finance Europe, says: “One of Robinhood’s main problems is the lack of liquidity in the face of strong demand on GameStop (GME) stock. is not only that of Robinhood however, as many other brokers have also come across it when offering GME. Indeed, Robinhood had to put some limits and traders rushed to other platforms like Square, SoFi, etc. It is because of these limitations that many investors have been unhappy and have filed complaints and claims against Robinhood; the company however denies any involvement in helping third parties, as no one outside the company did not influence the decision on the limits.
During this crisis, Robinhood has seen tremendous growth in its users
It rose to the top of the iOS app store for several days during the gaming frenzy and led the industry in downloads, with 600,000 people downloading the free trading app in one. day, according to JMP Securities. In January, JMP estimated that Robinhood has gained 3 million users. As a result, venture capitalists rushed to fund Robinhood, which had to raise billions of dollars to meet its capital needs. Robinhood raised over $ 3 billion in a matter of days.
The biggest challenge Robinhood will face when it emerges on the other side of the pandemic will be keeping large numbers of these new users on board without them blowing their accounts up. They got a glimpse of the scale of this challenge earlier this year in the wake of GameStop’s volatility, which has had tragic consequences.
This is where future regulation may well act as a headwind. Product innovation is good, but leveraged investing and fractional exposure to various asset classes pose challenges when it comes to managing risk adequately and reasonably. Too often, novice traders are not sufficiently aware of the huge risks they take when trading with leverage. The rewards are important, but the risks can be even more so.