Vlad Tenev and Baiju Bhatt who co-founded Robinhood.
Mark newcomer | CNBC
Fintech shapes billionaires every month.
The co-founders of Coinbase, together with the founders of Affirm and Marqeta, already rose to the ranks of billionaires this year. For years, Silicon Valley has faced established banks with the promise of a better customer experience, but only now are emerging retail apps, newbies to payments and online lenders achieving high ratings in the public market.
Now it’s Robinhood’s turn.
Roommates at Stanford nearly a decade ago, Vlad Tenev and Baiju Bhatt will each be worth about $ 2.6 billion on paper when their trading app debuts on Nasdaq later this month. This is based on a mean of $ 40 per share of the company’s price range reported in its updated IPO prospectus on Monday.
According to filing, CEO Tenev and Chief Creative Officer Bhatt will each own 7.9% of the company’s outstanding shares. They also each sell approximately $ 50 million worth of shares in the offering.
It’s been a stellar year for tech listings, with at least 12 companies going public through an IPO, direct listing, or special purpose vehicle (SPAC) and market cap of $ 10 billion or more. Between these companies and a few others with lower ratings, the tech industry shaped 16 billionaires in 2021.
Fintech takes advantage of an overwhelming share of the profits.
Coinbase CEO Brian Armstrong owns approximately $ 8.7 billion in shares in its cryptocurrency app following the company’s direct listing in April. Fred Ehrsam, who co-founded the company with Armstrong in 2012, owns a $ 2.7 billion equity interest. Jason Gardner, CEO of Marqeta, is worth nearly $ 2 billion after his payments technology company went public last month, while Affirm’s Max Levchin owns over $ 1.5 billion in stock in his online lender, im January went public.
Coinbase Founder and CEO Brian Armstrong will attend Consensus 2019 at the Hilton Midtown in New York City on May 15, 2019.
Steven Ferdman | Getty Images
SoFi, a provider of college loans, home loans, and a variety of investment and insurance products, went public on a SPAC in June and is now valued at $ 12 billion. Of course, no single owner owns a billion dollar stake.
That’s before you dive into the companies that are still private. Payment company Stripe was valued at $ 95 billion in a funding round in March, grossing siblings Patrick and John Collison’s co-founders a combined stake of $ 23 billion, according to the Bloomberg Billionaires Index. Klarna, a Swedish payment company, is now worth $ 46 billion in the private market. Klarna CEO Sebastian Siemiatkowski has a net worth of $ 2.2 billion, according to Forbes.
The list goes on. Chime, which provides banking services through cellphones, is valued at $ 14.5 billion, while Plaid, which provides back-end technology that connects apps to bank accounts, is valued at $ 13 billion after Visa forced it was to stop the planned takeover of the company.
“Our market is changing profoundly with consumers we never thought would embrace digital finance on a large scale,” Zach Perret, CEO and co-founder of Plaid, told CNBC as the latest round of funding announced in April has been.
Robinhood said it plans to sell shares for $ 38 to $ 42 each ahead of the 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 the volume of crypto trading increased and the popularity of meme stocks like GameStop and AMC Entertainment brought 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 end of 2020.
Robinhood co-founders retain voting rights
Tenev, 34, and Bhatt, 36, tackled their share of troubled headlines this year on their way to what is likely to be one of the biggest IPOs of 2021.
While the increased activity was a huge boon to Robinhood’s revenues, the company had to cease trading GameStop and other stocks in January as the unexpected surge in volume led to a liquidity crisis.
“To protect the company and our customers, we had to put restrictions on buying these stocks,” Tenev told CNBC’s Andrew Ross Sorkin after the restrictions were put in place.
Robinhood eventually raised $ 1 billion from investors to prop up its balance sheet, but the incident raised questions about the company’s business model known as payment for the flow of orders. Robinhood lets users buy and sell for free and charges market makers like Citadel Securities or Virtu for the right to conduct customer trades.
The financial industry regulator announced in June that Robinhood will pay fines of around $ 70 million for its system-wide outages and misleading communications and trading practices. The company faces dozens of proposed class action lawsuits, as well as reviews or investigations by regulators, attorneys general, the Securities and Exchange Commission, FINRA, and the US Department of Justice.
In its first prospectus earlier this month, Robinhood announced that Tenev’s phone had been seized by federal prosecutors as part of the GameStop investigation.
Nonetheless, Robinhood’s co-founders – both board members – are in a position to profit well from the company’s IPO and will control the vast majority of decisions from here.
Tenev and Bhatt will own all of Robinhood’s Class B shares following the offering. These shares have ten times as much voting power as Class A shares, according to the prospectus, so Tenev will control 26% of the voting rights and Bhatt 39% of the voting rights.
They’ve already paid out tens of millions of dollars worth of shares.
In 2018, they each sold $ 55 million in shares to investment firm DST Global in a secondary transaction, and the following year the co-founders participated in a $ 67.6 million takeover bid that “designated our employee shareholders.” was available.
Robinhood is a five-time CNBC Disruptor 50 company that topped this year’s list.
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CLOCK: CNBC’s full interview with Plaid CEO Zach Perret