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Robinhood Markets, Inc. (IPO)

Class Action
  • Active
Investigation
10/26/2021
Initial Lawsuit
12/17/2021
Lawsuit Progression
03/24/2022

Investigation

Investigation into Robinhood’s statements made in connection with its initial public offering (IPO) regarding the short-term transaction-based crypto-currency impact on revenue growth, significant investments aiming to prevent service-level disruptions, and security breaches.

This post is open for investors to gather facts, and findings and track their exposure to related lawsuits. We invite investors and shareholders to contribute to this investigation for their own benefit, add events to the factual timeline below and vote on events’ pertinence.

A lawsuit was subsequently filed. We will update this post as it unfolds.

  • Investigation Date
    10/26/2021
  • Public Offering Date
    July 29, 2021
  • Hypothetical Transgression
    Securities Violation
Main Event

Q3 2021 -

10/26/2021

SEC Filing

Robinhood reports its Q3 2021, for the period between July 1, 2021 through September 30, 2021, during which it conducted its initial public offering. The company reports total net revenues of $365 million, missing analyst estimates by close to $73 million along with a decline in monthly active users (MAUs), funded accounts, assets under custody (AUC), and average revenue per user (ARPU).

Robinhood discloses that Q3 transaction-based revenue from cryptocurrency trading, is only $51 million, way below the $233 million Robinhood earned from crypto trading in the second quarter (as described in its prospectus).

Robinhood’s net losses increase from $11 million to $1.32 billion due to a $1.24 billion stock based compensation expense, tied to the stock’s post-IPO performance, and its initial rally – triggering a massive payout to Tenev and Bhatt.

The stock impact compares the closing price immediately preceding the date of the event and the following closing price. The price difference also reflects the overall mix of information.

Stock Impact

Close Previous close Price variation Percentage variation
$35.44 $39.57 $-4.13 -10.44%
See more on Factual Timeline

Initial Lawsuit

First Complaint - 12/17/2021

A shareholder brought this federal securities class action on behalf of all persons and entities that purchased or otherwise acquired, Robinhood common stock issued in connection with the company’s July 28, 2021 initial public offering (IPO).
Please refer to the complaint for exceptions and details about the proposed class.

  • Filing Date
    12/17/2021
  • Public Offering Date
    07/29/2021
  • Transgression
    Securities Violation
  • Filing Firms
    Scott+Scott Attorneys at Law LLP
  • Case Title
    Golubowski v. Robinhood Markets, Inc.
  • Docket Number
    3:21-cv-09767
  • Court
    California Northern District Court
  • Free File
    Complaint

Allegations

According to the complaint, defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects. Specifically, defendants allegedly failed to disclose to investors that:

(i) at the time of the IPO, Robinhood’s revenue growth was experiencing a major reversal, with transaction-based revenues from cryptocurrency trading serving only as a short-term, transitory injection, masking what was actually stagnating growth; and
(ii) the company’s “significant investments” in enhancing the reliability and scalability of its platform were patently inadequate and/or defective, exposing Robinhood to worsening service-level disruptions and security breaches, particularly as the Company scaled its services to a larger user base.

Defendants

  • Company
    Robinhood Markets, Inc.
  • Chief Executive Officer
    Vladimir Tenev
  • Chief Financial Officer
    Jason Warnick
  • Founder
    Baiju Bhatt
  • Director
    Jan Hammer
  • Director
    Paula Loop
  • Director
    Jonathan Rubenstein
  • Director
    Scott Sandell
  • Director
    Robert Zoellick
  • Underwriter
    Goldman Sachs & Co. LLC
  • Underwriter
    J.P. Morgan Securities LLC
  • Underwriter
    Barclays Capital Inc.
  • Underwriter
    Citigroup Global Markets Inc.
  • Underwriter
    Wells Fargo Securities, LLC
  • Underwriter
    Mizuho Securities USA LLC
  • Underwriter
    JMP Securities LLC
  • Underwriter
    KeyBanc Capital Markets Inc.
  • Underwriter
    Piper Sandler & Co.
  • Underwriter
    Rosenblatt Securities Inc.

  • See Complaint For Additional Defendants . . .

Lawsuit progression

  • Docket Number
    3:21-cv-09767
  • Court
    California Northern District Court

Lead Counsel

03/24/2022

The court issued an order appointing the lead plaintiff and lead counsel.

Amended Complaint

06/20/2022

Lead Plaintiffs bring this action as a class action, pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure, on behalf of a class consisting of all persons and entities that purchased, or otherwise acquired, Robinhood common stock issued in connection with the company’s IPO that took place around July 28, 2021.

Factual Timeline

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