Investors are adding hundreds of millions more to Robinhood’s coffers as the pandemic ushers in new customers.
On Monday, the stock-trading app announced that it had raised yet another $320 million from new and existing investors, bumping its valuation up to $8.6 billion. New investors include TSG Consumer Partners and IVP.
The fresh funding comes via subsequent closings of a $280 million Series F round led by Sequoia Capital which valued the firm at $8.3 billion in May. At the time, co-CEO Vlad Tenev noted that Robinhood experienced a surge as new investors flocked to the platform amid the market’s coronavirus-induced ups and downs: Robinhood added 3 million funded accounts between the start of the year and early May, he said.
While Robinhood’s team declined to comment on the most recent raise, two months later, the app’s name is perhaps more visible than ever as the pandemic has enabled strange moves in the public markets thanks to retail investors that were once seen as marginal and unlikely to shift the market.
For instance: Shares of Hertz, the car-rental company, soared in June after it filed for Chapter 11 protection in June, a move that many attributed to nonprofessional players willing to take more iffy trades, including those on Robinhood. It was hardly a move a typical investment advisor would have condoned, but some investors appeared to make quite a bit off the bet.
Now Robinhood is confronting a core issue as it grows: What level of freedom does it give to its pool of inexperienced traders, and what guardrails does it put in place? The platform grew explosively in part by pitching “investing for everyone”—yet not everyone understands the stock market.
A 20-year-old Robinhood trader by the name of Alex Kearns committed suicide in June, citing massive trading debts and a negative trading balance of over $730,000 wracked up through options trading on the platform. While the suicide ultimately appeared to be the result of a terrible misunderstanding over the amount of Kearns’ actual debt, Robinhood’s co-CEOs Vlad Tenev and Baiju Bhatt wrote in light of the death that they were “considering additional criteria and education for customers” seeking certain kinds of more complex options trading, and planned to add additional educational content for customers.
“It is not lost upon us that our company and our service have become synonymous with retail investing in America, and that this has led to millions of new investors making their first investments through Robinhood,” the duo wrote in June. “We recognize this profound responsibility, and we don’t take it lightly.”