Fintech is minting billionaires by the month.
Already this year, Coinbase’s co-founders have joined the
billionaire ranks, along with the founders of Affirm and Marqeta. For years,
Silicon Valley has been taking on the banking incumbents with promises of a
better customer experience, but it’s only now that emerging trading apps,
payment upstarts and online lenders are achieving big public market valuations.
Now, it’s Robinhood’s turn.
Vlad Tenev and Baiju Bhatt, who were roommates at Stanford
almost a decade ago, are each poised to be worth about $2.6 billion on paper
when their trading app debuts on the Nasdaq later this month. That’s based on
the $40-pershare midpoint of the company’s price range given in its updated IPO
prospectus on Monday.
CEO Tenev and chief creative officer Bhatt will each own
7.9% of the company’s outstanding shares, according to the filing. They’re also
each selling about $50 million worth of shares in the offering.
It’s been a banner year for tech listings, with at least 12
companies that went public through an IPO, direct listing or special purpose
acquisition company (SPAC) attaining a market capitalization of $10 billion or
more. Between those companies and a few others with lower valuations, the tech
industry has minted 16 billionaires in 2021.
Fintech is capturing an outsized share of the gains.
Coinbase CEO Brian Armstrong owns stock in his cryptocurrency
app worth about $8.7 billion after the company’s direct listing in April. Fred
Ehrsam, who co-founded the company with Armstrong in 2012, owns a $2.7 billion
stake. Marqeta CEO Jason Gardner is worth close to $2 billion after taking his
payment technology company public last month, while Affirm’s Max Levchin owns
shares valued at over $1.5 billion in his online lender, which held its IPO in
January.
SoFi, a provider of college loans, home loans and a variety
of investment and insurance products, went public through a SPAC in June and is
now valued at $12 billion. To be sure, no individual holder owns a
billion-dollar stake.
That’s before dipping into the companies that are still
private. Payments company Stripe was valued at $95 billion in a financing round
in March, giving sibling co-founders Patrick and John Collison a combined stake
of $23 billion, according to the Bloomberg Billionaires Index. Klarna, a
Swedish payments company, is now worth $46 billion on the private market.
Klarna CEO Sebastian Siemiatkowski has a net worth of $2.2 billion, according
to Forbes.
The list goes on. Chime, which delivers banking services
through mobile phones, is worth $14.5 billion, while Plaid, which provides
back-end technology that connects apps with bank accounts, is valued at $13
billion after Visa was forced to scrap its planned acquisition of the company.
“Our market is seeing a sea change, with consumers that we
never thought would be embracing digital finance engaging with it in a big
way,” Plaid CEO and co-founder Zach Perret told CNBC when the latest financing
round was announced in April.
Robinhood said it plans to sell shares at $38 to $42 each
prior to its expected Nasdaq debut next week. That could value Robinhood at up
to $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 soared and the popularity of meme stocks like GameStop and AMC
Entertainment led millions of new traders to the app. At the end of March,
Robinhood had 17.7 million monthly active users, up from 11.7 million at the
close of 2020.
Robinhood co-founders will retain voting control
Tenev, 34, and Bhatt, 36, have dealt with their share of
troubled headlines this year on the path to what will likely be one of the
biggest IPOs of 2021.
While the increased activity was a major boon to Robinhood’s
revenue, the company had to halt trading of GameStop and other stocks in
January because the unexpected surge in volume created a liquidity crunch.
“In order to protect the firm and protect our customers we
had to limit buying in these stocks,” Tenev told CNBC’s Andrew Ross Sorkin
after the restrictions were put in place.
with Robinhood CEO Vlad Tenev on decision to restrict
trading on GameStop
Robinhood ultimately raised $1 billion from investors to
shore up its balance sheet, but the incident raised questions about the
company’s business model, known as payment for order flow. Robinhood lets users
buy and sell for free, and charges market makers such as Citadel Securities or
Virtu for the right to execute customer trades.
The Financial Industry Regulatory Authority said in June
that Robinhood will pay roughly $70 million in penalties for its systemwide
outages and misleading communication and trading practices. The company faces
dozens of proposed class-action lawsuits, as well as examinations or
investigations by regulators, state attorneys general, the Securities and
Exchange Commission, FINRA and the U.S. Department of Justice.
In its initial prospectus earlier this month, Robinhood
disclosed that Tenev’s phone was seized by federal attorneys as part of the
GameStop probe.
Still, Robinhood’s co-founders — who are both board members
— are positioned to profit handsomely when the company goes public and will
control the vast majority of decisions from here.
Tenev and Bhatt will own all of Robinhood’s Class B shares
after the offering. Those shares have 10 times as much voting power as Class A
shares, according to the prospectus, giving Tenev will control of 26% of voting
power, and Bhatt control of 39%.
They’ve already cashed out tens of millions of dollars worth
of shares.
In 2018, they each sold $55 million of stock to investment
firm DST Global in a secondary transaction, and the following year the
co-founders participated in a $67.6 million tender offer available to “certain
of our employee stockholders,” the filing said.
Robinhood is a five-time CNBC Disruptor 50 company that
topped this year’s list.
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