After an extremely rocky March, the trading app for millennials is starting May off with a bang.
Menlo Park, Calif-based Robinhood announced in a blog post on Monday that it has raised $280 million in a funding round that now values the company at $8.3 billion. The company said the funding comes after it added three million more users to its platform this year, despite multiple trading outages that had users demanding the app be probed by regulators.
The financial technology startup, which now boasts 13 million users, made headlines in March as crippling technical outages left its more than 10 million customers in the dark for close to two full trading days amid record-setting market volatility over the spreading coronavirus.
On Thursday, it said it plans to use some of that money to invest in its platform. “That means hiring more top talent across all of our offices, including our newest office in Denver.”
But fintech experts speculated that Robinhood’s investors may also be gearing up for the company to be acquired.
“13 million users is a lot of users, but $280 [million] is a lot for an outfit that can’t keep up with trading volume,” said one fintech insider. “I guess they could still be a[n acquisition] target for a big bank, but I don’t see them getting more anything near half of $8 billion.”
Robinhood’s no-fee trading platform had been shaking the online trading space up before the COVID-19 pandemic by forcing established brokerages to slash their own fees and then consolidate. In the weeks leading up to the crash, Morgan Stanley scooped up E*Trade for $13 billion and Schwab merged with TDAmeritrade in a deal valued at twice that amount.
Those deals left Robinhood in the suddenly longer shadows of even more massive giants.
“A quarter of a billion is a nice chunk of change to fix your infrastructure,” mused one broker. “I hope they don’t use it to acquire more users in a recession.