By
Godfrey Benjamin
April 22nd, 2024
The IRA market is a ripe one for Robinhood as Americans have a vast holding in the retirement scheme, worth over $12.6 trillion at the end of March, up 2.8% from the end of December, according to the Investment Company Institute.
American financial services company, Robinhood Markets Inc is set to offer retirement accounts in the United States, a revelation made by the firm’s co-founder and Chief Executive Officer, Vlad Tenev ahead of its well-anticipated Initial Public Offering (IPO) billed for July 29. As reported by Reuters, Tenev revealed this plan on Saturday in a webcast featuring users of the Robinhood trading app with a vested interest in the forthcoming IPO.
Robinhood has edged up its popularity in the past year as the coronavirus left people with the option to explore other sources of making income, as stocks and crypto trading were amongst the options being favored. Known for its commission-free markets, Robinhood has grown in popularity amongst young retail traders, and the firm currently boasts of about 18 million funded investment accounts on its platform.
Capitalizing on its growth over the past few years, Robinhood is set to go public in an IPO in which it plans to raise $2 billion. Following the IPO, Robinhood’s valuation may be pegged at about $35 billion, pitching it as one of the biggest brokerages in the United States. The move to launch a US Retirement Account including an Individual Retirement Account (IRA) and Roth IRAs is to broaden and diversify its product offering to tap a larger market share.
“We are interested in building more account types, including IRAs and Roth IRAs, we’ve been hearing that a lot from our customers. We want to make first-time investors into long-term investors,” Tenev said in response to an investor question.
The IRA market is a ripe one for Robinhood as Americans have a vast holding in the retirement scheme, worth over $12.6 trillion at the end of March, up 2.8% from the end of December, according to the Investment Company Institute.
Robinhood Retirement Accounts to Help Brood Long-Term Investors
The business clients Robinhood attracts are typically those who buy and hold stocks, crypto, and related assets. However, users are at liberty to sell off their holdings at any time. With the launch of the Retirement Accounts, the online brokerage will be attracting a new set of accounts that are compelled by law to hold their funds for a relatively long timeframe.
Unlike the unbridled sell-offs in crypto and stocks which most Robinhood users are known for, withdrawals from an IRA typically attract a heavy penalty, and as such help nurture more patient and long-term clients. The savings from the prospective retirement account owners may help contribute to the liquidity Robinhood requires to serve its growing userbase.
The Call for IPO Boycott
At the heat of the GameStop Corp (NYSE: GME) short squeeze earlier in the year, Robinhood was embroiled in a heat with retail investors on such social media platforms as Reddit as it limited the trading of GME and other heavily shorted stocks. While the firm’s excuse was the lack of enough liquidity to bolster the volatile trading, retail investors believe the firm was aiding the Wall Street firms with a short trading mantra.
This history is causing some to call for the boycott of the Robinhood IPO by retail investors to whom the firm wants to allocate as much as 20% to 35% of the total shares it plans to offer. The interests from investors as of now do not suggest the likelihood of the boycott having a major impact on the success of the IPO.