US Fintech firm Robinhood is reportedly getting ready to finalize its investment round worth an estimated $200-$250 million. Following the successful completion of this round, the Menlo Park-based brokerage firm would be valued at roughly $8 billion, according to recent reports.
Sources familiar with the matter (cited by Bloomberg and CNBC) said that Sequoia Capital is leading Robinhood’s funding round.
The $8 billion estimate, which is a pre-money valuation, is slightly more than the $7.6 billion valuation Robinhood received when it secured $323 million in capital in July 2019.
Traditional retail brokerage firms like E*Trade have been charging fees of around $10 per trade. Meanwhile, Robinhood has managed to onboard well over 10 million customers (as of December 2019), mainly by offering zero-fee trading.
Established in 2013, Robinhood claims to have achieved record-level revenue growth in recent weeks. The American Fintech company revealed that many investors have been eager to take advantage of a dramatic increase in market volatility, following the Coronavirus (COVID-19) outbreak, and resulting economic uncertainty.
But the increased demand appears to have strained Robinhood’s trading platform, with the company’s software experiencing performance issues and outages.
Robinhood said it will compensate investors who may have been impacted by these outages on a case-by-case basis. There’s one customer who has filed a lawsuit after encountering problems with the firm’s stock trading app.
In late 2019, Robinhood withdrew its bank charter application, which was filed with the Office of the Comptroller of the Currency.
In September 2018, Robinhood was criticized for the lack of transparency in its business model.
The company had been charging high-frequency trading firms more than 10 times the amount they’d normally pay competing brokerage companies for the same volume.
An examination of the Fintech firm’s operations by the US Securities and Exchange Commission found that the broker had been selling its customers’ orders at huge premiums.